WORLD TRADE
ORGANIZATIONWT/DS264/1
G/L/566
G/ADP/D42/1
19 September 2002
(02-5021)
Original:  English
UNITED STATES – FINAL DUMPING DETERMINATION
ON SOFTWOOD LUMBER FROM CANADA
Request for Consultations by Canada
The following communication, dated 13 September 2002, from the Permanent Mission of
Canada to the Chairman of the Dispute Settlement Body, is circulated in accordance with Article 4.4of the DSU.
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My authorities have asked me to request consultations with the Government of the
United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes  (DSU), Article XXII of the General Agreement on Tariffs and Trade 1994
(GATT 1994) and Article 17 of the Agreement on Implementation of Article VI of GATT 1994
(Anti-Dumping Agreement ), concerning the final affirmative determination of sales at less than fair
value with respect to certain softwood lumber products from Canada (Inv. No. A-122-838) announced
by the United States Department of Commerce on 21 March 2002 pursuant to section 735 of the Tariff
Act of 1930, as amended on 22 May 2002 (Final Determination).
The measures at issue include the initiation of the investigation, the conduct of the
investigation and the Final Determination.  The Government of Canada considers these measures and,
in particular, the determinations made and methodologies adopted therein by the United StatesDepartment of Commerce under authority of the United States Tariff Act of 1930 , to violate the
Anti-Dumping Agreement  and the GATT 1994 (in particular Articles 1 and 18.1 of the Anti-Dumping
Agreement  and Article VI of the GATT 1994) for, among others, the following reasons:
1. The United States Department of Commerce improperly initiated the anti-dumping
investigation that resulted in the Final Determination in contravention of Article 5 of the
Anti-Dumping Agreement  (including Articles 5.2, 5.3, 5.4 and 5.8).  The application to initiate
filed by the US applicant failed to provide evidence of dumping, injury and causation that was
reasonably available, including prices at which softwood lumber was sold in Canada.  As a
whole, the application did not contain "sufficient evidence" to justify the initiation of aninvestigation.  Further, the initiation of the 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 US indus try support the application as a condition of
receiving payments under the CDSOA, made an objective and meaningful examination ofindustry support for the application impossible.
2. The United States Department of Commerce improperly applied a number of methodologies
inconsistent with Article VI of the GATT 1994 and Articles 1, 2 (including Articles 2.1, 2.2,
2.4 and 2.6) and 9.3 of the Anti-Dumping Agreement  as a result of improper and unfairWT/DS264/1
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comparisons between the export price and the normal value, resulting in artificial and/or
inflated margins of dumping.  These included:
(a) reliance on unrepresentative home market prices and improper determinations that
sales of the like products in Canada were not in the ordinary course of trade, the
effect of which led the Department of Co mmerce to disregard a significant proportion
of domestic sales of like products (identical or similar goods) for purposes of making
price to price comparisons and for  purposes of calculating profit in determining
constructed values;
(b) failure to properly allocate costs in calculating the cost of production of the like
product in Canada, including the failure to extend the value-based cost allocation
methodology to take into account differences in lumber dimension, the effect of
which led to improperly determining constructed values and profit, distortions in the
application of the sales below cost test, and limiting the use of like products forpurposes of making price to price comparisons;
(c) application of the practice of "zeroing", the effect of which was to inflate margins of
dumping and which, in the recommendations and rulings of the Dispute Settlement
Body in an earlier dispute, was found to be inconsistent with the Anti-Dumping
Agreement when establishing the existence of margins of dumping;
(d) failure, when conducting comparisons between like products, to make due allowance
for differences that affect price comparability;
(e) the use of an unreasonable amount for profit in the calculation of constructed values;
(f) failure to apply a reasonable method in calculating amounts for administrative, selling
and general expenses,  including improper adjustment to export price  and an improper
allocation of general and administrative expenses including financial expenses; and
(g) failure to apply a reasonable method to account for by-product revenues as offsets in
calculating costs of production.
3. The United States Department of Commerce failed to establish a clear, definitive and proper
product scope for investigation and improperly initiated and pursued the investigation with
regard to certain products contrary to Articles 5.1, 5.2, 5.4 and 5.8 of the  Anti-Dumping
Agreement .  The Department of Commerce further failed to give parties opportunity to defend
their interests in contravention of Article X:3(a) of the GATT 1994 and Article 6 of the
Anti-Dumping Agreement  (including Articles 6.1, 6.2, 6.4 and 6.9), by failing to issue timely
decisions and provide reasonable schedules for briefing and hearings, and to adequately
consider the representations of the parties.
Canada reserves the right to raise additional claims and legal matters regarding the initiation,
conduct and Final Determination in the investigation during the course of consultations.WT/DS264/1
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I look forward to receiving your reply to this request and in accordance with Article 4.8 of the
DSU, to selecting a mutually acceptable date for holding consultations within 10 days from the date of
receipt of this request.  Canada welcomes any sugge stions that the United States may wish to make
concerning dates on which the consultations could take place.
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