Legal
Proceedings in the
Countervailing Duty Investigation
Background Overview:
In April 2001, the US
Coalition for Fair Lumber Imports filed countervailing duty (CVD) and anti-dumping (AD) petitions with the U.S. Department of Commerce. For BC,
the Coalition's CVD petition alleged that government pricing and log export
controls provided subsidies to lumber producers, and calculated a subsidy
rate based on cross-border (B.C./Washington State) comparisons of log
pricing. The Coalition also identified a number of other programs as subsidies
for the Department of Commerce to investigate further.
The Investigation
Under US law for a
countervailing duty to be imposed, a finding of injury and subsidy is
required:
Injury:
On May 16, 2001, the US International Trade Commission (USITC) made a preliminary
determination that the US
industry was injured as a result of alleged subsidies being provided to
Canadian softwood lumber producers. This supported the continuation of
legal proceedings of the countervailing duty investigation by the Department
of Commerce (note that anti-dumping or countervailing duties can’t be
imposed without a determination of injury or threat of injury, to the
United States
domestic market). In the final determination on
May 2, 2002, the USITC voted 4 to 0 that the
United States
softwood lumber industry was "threatened" with material injury by
reason of imports of softwood lumber from Canada.
On
September 10, 2004, the USITC reversed this decision under the instruction of the NAFTA panel
reviewing the decision, and also launched an extraordinary appeal of this
reversal. On August 11, 2005
the Extraordinary Challenge Committee (ECC) did not support the US appeal. The
US has not conformed to the NAFTA injury panel’s findings by removing the
countervailing and anti-dumping duties [more info].
Subsidy:
In May 2001, the US Department of Commerce (DOC) undertook an investigation
in response to the Coalition's petition. The period of investigation
(POI) was April 1, 2000
to
March 31, 2001. On May 22, 2002
cash deposits began to be collected by the US Customs Service on Canadian
softwood lumber imported into the US. The combined cash deposit rate was 27.22% - a countervailing duty
rate of 18.79% and anti dumping duty of 8.43%.
As with the USITC injury
finding, Canada
also challenged the DOC subsidy finding at NAFTA.
After five remands (recalculations) at the instruction of the panel,
the DOC published a finding that the Canadian subsidy was de minimis (less
than 1%) on November 22, 2005. A de minimis finding means that Commerce must cease collecting the
countervailing duties. The US
may also appeal this result to an Extraordinary Challenge Committee at NAFTA
[more info].
Administrative
Reviews
Each year (unless the
case is settled), an administrative review will be conducted to recalculate
the duty rate for shipments during the previous year, and to establish a
new cash deposit rate for future shipments. The first administrative
review began on June 1, 2003 and reviewed the period from May 22, 2002 to
March 31, 2003. The second administrative review began on June 1,
2004 and reviews the period of April 1, 2003 to March 31, 2004.
Subsequent reviews will begin on June 1 of the given year and will review
the most recently ended government fiscal year.
Each administrative
review can take up to 18 months to complete. If the administrative
review (after any appeals are concluded) results in a lower duty rate than
the current cash deposit rate, companies would be refunded the difference
plus interest following the completion of all appeals of the administrative
review. However, should the duty rates increase, companies would be
required to pay the difference between the current deposit rate and the
results of the review.
The first
administrative review resulted in a reduction of the cash deposit rate
20.15% beginning December 20, 2004, from 27.22%. However, the excess duties for the May 2002 to March
2003 period remain undistributed until all appeals are exhausted.
The second administrative review (AR2)
results were released December 6, 2005 and result in a drop in the cash
deposit rate to 10.81% beginning about December 13, 2005. The excess
duties for the period April 2003 to March 2004 will remain undistributed if,
as is expected, the AR2 result is appealed at NAFTA.
Roles and
Responsibilities
The federal government
is responsible for the overall co-ordination of activities that occur in
response to the CVD case and works closely with provincial
governments. In British Columbia, the BC Ministry of Forests is the
lead agency responsible for responding to activities on the softwood lumber
case and has engaged Akin Gump Strauss Hauer & Feld LLP - one of the
top law firms in Washington, DC - to assist in the BC defence activities.
Industry has the lead
on an anti-dumping case. The federal government is not a direct
participant in an anti-dumping case but has overall responsibility for
international trade and monitors the investigation to ensure it is in
accordance with the WTO.
Current Status &
Chronology of Events.
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