NAFTA
Challenges and Decisions
Current Status:
Overview: Three NAFTA binational panels
were formed to review the U.S. determinations associated with the May 22,
2002 imposition of duties on softwood lumber. These panels looked at the countervailing duty (CVD)
determination, the anti-dumping determination and the threat of injury
determination. The U.S.
government requested that an Extraordinary Challenge Committee review the
final decision of the NAFTA Panel on injury.
In addition, Canada has
requested that NAFTA panels be formed to review the US Department of
Commerce’s first and second Administrative Review decision on CVD, and
its ‘section 129’ implementation of WTO panel determinations.
Challenges to the
Administrative Review Results on Subsidy (CVD): On January 18, 2005, Canada
requested a NAFTA panel review the US Department of Commerce’s Final
Results in the Countervailing Duty Administrative Review. On January 11, 2006, Canada requested a
review of Commerce's second Administrative Review results. These
challenges
ensure that all duty deposits to date remain undistributed until the
challenges are finished. Depending on remands, final Panel decisions could be one to two
years away.
Challenges to
Commerce’s Implementation of WTO rulings: In January and May of 2005, Canadian producers requested NAFTA
panels to review the US implementation of the WTO panel determinations (the
section 129 implementations) on injury and dumping.
Challenges to the
May 2002 Final Determinations
Threat of Injury: This panel was
established on May 22, 2002.
Since that time, the panel issued three decisions culminating with
an August 31, 2004 finding that the record does not support a threat of
injury finding and ordering the USITC to issue a new determination
consistent with their finding within 10 days.
On September 10, 2004,
the USITC issued a determination, consistent with the NAFTA Panel's
decision of August 31, 2004, that the US softwood lumber industry is not
threatened with material injury. However, the commission said it was
only complying with the NAFTA ruling because it "respects and is bound
by the NAFTA dispute settlement process."
On November 24, 2004 the US
requested a review of the
NAFTA Panel Injury Decision by an Extraordinary Challenge Committee
(ECC).
On August 11, 2005
the ECC unanimously upheld the NAFTA
panel ruling and denied the US challenges (NAFTA
ECC Decision).
This clear win by Canada at the ECC should mean that the
case be terminated. However,
the US has stated that the win will have no impact on the antidumping and
countervailing duty orders because of the ITC's revised November 2004
injury determination. Canada
believes that this position is unlawful, and Canada and the Canadian Lumber
Trade Alliance (CLTA) filed an action in the US Court of International
Trade
challenging this interpretation.
NEW!!!
On July 21, the CIT ruled in Canada's favour (details).
On
September 13, 2005 the US Coalition
initiated a
constitutional challenge of the NAFTA dispute settlement system as a
result of the ECC ruling (Coalition
Press Release).
NEW!!! Subsidy (CVD):
This NAFTA panel was established in April 2002 and ended on March 17, 2006, when the
Panel affirmed Commerce's November 22, 2005 determination. (Commerce
Fifth Remand)
The November
22nd determination was Commerce's fifth recalculation of the countervailing
duty in response to the Panel, resulting in a revised CVD rate of
0.80%, which is de minimis. This de minimis finding means that the
United States should revoke the countervailing duty order and stop
collecting countervailing duties at the border. The anti-dumping
portion of the duties would remain.
The US
Department of Commerce has until April 27, 2006 to appeal this panel result
through an Extraordinary Challenge Committee. Canada does not believe
there are any grounds for such an appeal.
Anti-Dumping: This panel was established in
April 2002. The panel issued its first report in July 2003 and
remanded issues back to the US Department of Commerce. In response,
Commerce issued its remand determination in October 2003. The panel
issued its second report in March 2004 and further remanded issues back to
the DOC. The DOC issued its second remand determination on April 23, 2004.
On June 9, 2005, the
NAFTA panel response to the second remand determination was released.
The Panel remanded the anti-dumping calculations to Commerce with the
instruction to revoke the anti-dumping duty order on West Fraser Mills due
to their de minimis rate, and to recalculate the dumping margins for other
companies without using the WTO illegal practice of “zeroing” sales with a
dumping margin of less than zero.
On July 13, 2005,
Commerce issued its third remand determination. Commerce switched calculation methods in this remand,
resulting in all companies’ dumping rates rising, and West Fraser’s rate no
longer being de minimis. The Panel has to date not responded to this
latest redetermination.
Links to the NAFTA
Panel decision reports and the US Remand Determinations associated with
these three challenges are on the NAFTA
and ITCanada
websites.
Chapter 11 Challenges: NAFTA Chapter 11 states that each Party in NAFTA
“shall accord to investors of another Party treatment no less favourable
than that it accords, in like circumstances, to its own investors with
respect to the establishment, acquisition, expansion, management, conduct,
operation, and sale or other disposition of investments”. Canfor, Tembec and Terminal Forest
Products each filed lawsuits claiming that the US government, in its
actions related to softwood lumber, has breached NAFTA Chapter 11. These cases continue, after being combined
into a single case in 2005. Further information on these cases
can be found at the US
Department of State website.
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