UNITED STATES - PRELIMINARY DETERMINATIONS
WITH RESPECT TO CERTAIN SOFTWOOD LUMBER
FROM CANADA

Report of the Panel

(Continued) 

VI. INTERIM REVIEW

6.1 On 19 August 2002, the United States submitted a written request for review by the Panel of particular aspects of the interim report issued on 26 July 2002. Canada did not provide any comments on the interim report. Canada commented on the United States' request for interim review on 26 August 2002. Neither party requested an additional meeting with the Panel.

6.2 We have reviewed the comments presented by the United States and the reaction thereto by Canada and have finalized our report. We note that in response to the comments received, the Panel corrected typographical and other clerical errors throughout the interim report.

6.3 The United States requested changes to the last sentence of paragraph 7.59 of the interim report. The United States posited that the Panel should have declined to consider the issue of adjustments to the benchmark price used by the USDOC, as this issue did not form part of the Panel's terms of reference. Canada urged the Panel to reject the United States' suggestion. Canada argued that its claim relating to the USDOC's determination and measurement of benefit was sufficiently identified in its request for establishment of a panel. According to Canada, the US was confusing "claims" and "legal arguments". We considered that paragraph 7.59 of the interim report referred to certain arguments which had been developed by Canada before us as part of its claim relating to the measurement of benefit by the USDOC. In particular, we were of the view that Canada's arguments concerning the appropriateness of the adjustments used by the USDOC to calculate the benchmark stumpage price formed part of Canada's claim concerning the benchmark for measuring the benefit, as set forth in its panel request. Canada developed a number of arguments under this claim, and as we had already found against the US on this claim on the basis of other more principal arguments, we saw no reason to address this additional Canadian argument in support of its claim. We have adjusted the drafting of paragraph 7.59 to clarify this point.

6.4 The United States further took issue with the Panel's statement in the first sentence of paragraph 7.74. According to the US, it had not conceded, as the Panel suggested, that in a certain number of cases the lumber producers were independent from the tenure harvesters and may have had to pay an arm's-length price to obtain the allegedly subsidized logs from the harvesters. The US also commented that the last sentence of the preceding paragraph 7.73 referred to arm's-length purchases of timber from private lands or from US suppliers, not purchases of Crown timber. The US therefore requested the Panel to revise the first sentence of paragraph 7.74. Canada commented that in its view the Panel's factual conclusion in paragraph 7.74 was correct and that the US was simply disagreeing with the Panel's appreciation of the evidence on the record. Moreover, Canada argued that the passage quoted by the Panel in the last sentence of paragraph 7.73 also referred to lumber producers purchasing logs at arm's-length in addition to lumber producers purchasing logs from private lands and US suppliers. We considered that the facts set out in paragraph 7.73, which had been confirmed by the US in its answers to questions from the Panel, were not contested. According to these uncontested facts, a certain percentage of Crown timber harvest is done by independent harvesters (i.e. harvesters that are not related to lumber producers). As the evidence on the record showed, this percentage differed from province to province. In the first sentence of paragraph 7.74, we only summarized that the factual information provided to us by the US in the course of the proceedings showed that in a certain number of cases, the lumber producers were independent from the tenure harvesters and may have had to pay an arm's-length price to obtain the logs from the harvesters. We acknowledge that the US has on various occasions during the proceedings argued that the evidence does not support Canada's claim that there is a significant volume of Crown timber that the provincial governments provide to truly independent loggers who then sell the timber at arm's-length to the lumber mills. However, as paragraph 7.74 did not state that the US conceded that there was a significant number of such transactions nor that the US conceded that these transactions were "actual" arm's-length transactions between "truly" independent harvesters, we saw no reason to amend the text of paragraph 7.74 as suggested by the US.

6.5 The United States finally requested a change to footnote 146 regarding the US position. We decided to amend this sentence taking into account the comment made.

VII. FINDINGS

7.1 Canada is challenging the imposition of provisional measures by the United States on imports of softwood lumber from Canada on the basis of the United States Department of Commerce (USDOC) Preliminary Countervailing Duty Determination (hereafter: the "Preliminary Determination") and the USDOC Preliminary Determination of Critical Circumstances (hereafter: the "Preliminary Critical Circumstances Determination"). In addition, Canada is challenging certain provisions of the US laws and regulations concerning expedited and administrative reviews. We will discuss these three sets of claims in the order in which they were presented to us by Canada. We will therefore first address the first set of claims which relates to the preliminary findings and determinations of the USDOC concerning subsidization of softwood lumber from Canada as set out in the USDOC Preliminary Determination. We will then discuss the second set of claims which concerns the USDOC's preliminary determination of the existence of critical circumstances which formed the basis for the retroactive application of provisional measures in this case. Finally, we will examine the third and final set of claims which refers to the consistency of the US legislation with the WTO Agreement, in particular, US countervailing duty laws and regulations on expedited and administrative reviews as well as the application of the legislation in the challenged investigation of softwood lumber from Canada.

7.2 As a preliminary matter, we note that in the course of these proceedings, we decided to accept for consideration one unsolicited amicus curiae brief from a Canadian non-governmental organization, the Interior Alliance. This brief was submitted to us prior to the first substantive meeting of the Panel with the parties and the parties and third parties were given an opportunity to comment on this amicus curiae brief. After this meeting, we received three additional unsolicited amicus curiae briefs. For reasons relating to the timing of these submissions, we decided not to accept any of these later briefs.

A. CLAIMS RELATING TO THE PRELIMINARY COUNTERVAILING DUTY DETERMINATION

1. Introduction

7.3 Canada is challenging the USDOC's Preliminary Countervailing Duty Determination with respect to certain softwood lumber from Canada of 9 August 2001. Canada argues that the USDOC preliminary findings and determinations and the imposition of provisional measures by the US are inconsistent with its obligations under the Agreement on Subsidies and Countervailing Measures ("SCM Agreement") because:

(a) the Canadian "stumpage"²⁶ practices in question are not "subsidies" as defined in Article 1 of the SCM Agreement. Specifically:

• "stumpage" is not a "financial contribution" within the meaning of Article 1.1(a) of the SCM Agreement,
   
• even if stumpage were a financial contribution, the USDOC's determination and measurement of a "benefit" is based on a "cross-border" methodology that is not permitted by the SCM Agreement, and
   
• even if a cross-border methodology were permitted, the USDOC's determination assumes holders of harvesting rights pass through an alleged benefit to softwood lumber producers, without any basis for the assumption;

(b) the USDOC impermissibly inflated the alleged subsidy rate by calculating a country-wide rate based on only a portion of Canadian production and exports of softwood lumber²⁷, and

(c) the USDOC impermissibly inflated the provisional measures imposed by applying them on an entered value basis after having calculated the subsidy rate using first mill value.

7.4 Canada therefore requests that the Panel find that the Preliminary Countervailing Duty Determination of the United States in the softwood lumber case violates Articles 10, 14, 17.1, 17.2, 17.5, 19.4 and 32.1 of SCM Agreement and Article VI:3 of the GATT 1994.

7.5 The United States asserts that the USDOC correctly determined the existence of a subsidy to Canadian softwood lumber producers in accordance with the SCM Agreement as it found that the Canadian provincial stumpage programmes conferred a benefit on Canadian softwood lumber producers. The US therefore requests the Panel to reject all of Canada's claims relating to the Preliminary Countervailing Duty Determination.

2. Claim 1: inconsistent finding of the existence of a financial contribution.

(a) Arguments of the parties

(i) Canada

7.6 Canada considers that the USDOC erred in determining that "stumpage" is a financial contribution in the form of the provision of a good by the government.²⁸ Canada argues that the practice of stumpage, which it views as a right to exploit an in situ natural resource, or more specifically, the right to harvest standing timber, is not a financial contribution. According to Canada, it is a form of a property right which cannot be equated to the provision of a good or a service by the government as required by Article 1.1(a)(1)(iii) SCM Agreement.²⁹ In Canada's view, rights such as profits � prendre and licences (two different forms of stumpage) are not included within the scope of the Agreement.³⁰ In Canada's view, the ordinary meaning of a "good" in the SCM and GATT/WTO context is tangible or movable personal property; and as an intangible real property right, stumpage is thus not a good. Canada also refers to the negotiating history of Article 14 SCM Agreement in support of its argument that harvesting rights like stumpage are not "goods".³¹ Canada submits that even if one were to consider that in fact it is standing timber, rather than harvesting rights, which is made available through the tenure or licence agreements, standing timber is not a "good" in the sense of Article 1.1(a)(1)(iii) SCM Agreement. Furthermore, in Canada's view, the term "goods" in Article 1.1(a)(1)(iii) SCM Agreement has the same meaning and scope as "products" used elsewhere in the SCM Agreement and the WTO Agreement, in particular Article II of GATT 1994, i.e. tradeable items with an actual or potential customs classification. According to Canada, standing timber which cannot be traded across borders is, for this reason as well, not a "good" in the sense of Article 1.1(a)(1)(iii) SCM Agreement.

7.7 In addition, Canada submits, to "provide goods" implies a positive action on the part of the government in respect of the goods themselves, and not any other action that merely allows someone to obtain goods or which has the same economic effect as the government action which consists of providing goods.³² Canada asserts that the United States' broad interpretation of the word "provide" as "to make available" is untenable, for it offers an interpretation of the term "provide" that makes little sense in context and that is not consistent with the way that term is used throughout the WTO Agreement. Throughout the WTO Agreement, the word "provide" is used to indicate the giving of something, rather than more generally enabling someone to obtain or produce something. According to Canada, the more common meaning of "provide" is "supply".³³ Canada argues that, given the use of the word "purchase" as an opposite of "provide" in subparagraph (iii), this sense of provide, implying to give or to sell, is far more contextually logical than the general term "make available". Canada further asserts that the proposed United States interpretation encompasses a range of government actions that go far beyond those contemplated under Article 1.1(a)(1)(iii) SCM Agreement. According to Canada, to "make available services", for example, would include in the US interpretation any circumstance in which a government action makes possible the receipt of services. Canada submits that the financial contribution test is not concerned with the consequences of a government action, however, but with those actions themselves.³⁴

7.8 Canada submits therefore that the USDOC Preliminary Determination that the right to harvest standing timber (stumpage) constitutes a "financial contribution" is inconsistent with Article 1.1(a) SCM Agreement and as a result violates Articles 10, 17.1(b), 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994.

(ii) United States

7.9 The United States is of the view that the Canadian provincial stumpage programmes provide a financial contribution, in the form of a good, standing timber, to the softwood lumber producers in Canada. The United States argues that the ordinary meaning of a "good" includes an "identified thing to be severed from real property".³⁵ According to the United States, Canada is elevating form over substance when it argues that stumpage only confers the right to harvest timber. In the view of the United States, there is no meaningful distinction between providing standing timber as such or providing the right to harvest standing timber as the clear purpose of the stumpage programmes is to provide timber to Canadian mills that make lumber or wood pulp. According to the United States, the ordinary meaning of "to provide", the verb used in Article 1.1(a)(1)(iii) SCM Agreement, is "to make available".³⁶ In the US view, Canada is certainly making the standing timber available to the loggers by providing the right to harvest the timber standing on Crown land.

7.10 The US argues that there is no "natural resources" exception in the SCM Agreement, and that the provision of a good, like timber, thus constitutes a financial contribution in the sense of Article 1.1(a)(1)(iii) SCM Agreement. The only exception provided for in the Article is for general infrastructure. The United States asserts that the context, object and purpose of Article 1 SCM Agreement confirm that if the government provides a good in the form of a natural resource which constitutes the major input for a product, this practice is covered by Article 1 SCM Agreement as it is a practice through which the government has the ability to provide an advantage that would not be available on the market. According to the US, the "negotiating history" to which Canada refers in support of its argument that harvesting rights are excluded from the scope of Article 1 SCM Agreement is an informal discussion paper which does not shed light on the consensus view. The United States therefore requests the Panel to reject Canada's claim concerning the USDOC's Preliminary Determination of the existence of a financial contribution.

(b) Analysis

7.11 Canada claims that the USDOC Preliminary Determination that the Canadian provincial stumpage programmes constitute a financial contribution in the form of the provision of a good is inconsistent with Article 1.1 (a) SCM Agreement. Article 1.1 SCM Agreement provides as follows:

Article 1

Definition of a Subsidy

"1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:

(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);

(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);

(iii) a government provides goods or services other than general infrastructure, or purchases goods;

(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments;

or

(a)(2) there is any form of income or price support in the sense of Article XVI of GATT 1994;

and

(b) a benefit is thereby conferred." (emphasis added)

7.12 Article 1.1 SCM Agreement defines a subsidy as a financial contribution by the government which confers a benefit. An investigating authority, in a countervailing duty (CVD) investigation will thus as a first step need to establish the existence of a financial contribution by the government. Subparagraph (iii) of Article 1.1(a)(1) SCM Agreement states that a financial contribution exists if the government provides "goods or services other than general infrastructure". In its Preliminary Determination, the USDOC stated that :

"We preliminarily determine that the provision of stumpage by the provincial governments constitutes the provision of a good or service under section 771(5)(D)(iii) of the [Tariff Act of 1930]. Thus, we preliminarily determine that the provincial governments have provided a financial contribution as defined under section 771(5)(D) of the Act to Canadian softwood lumber producers."³⁷

7.13 In order to determine whether the USDOC correctly concluded that "stumpage" by the government constitutes the "provision" to the Canadian softwood lumber industry of a "good", in the sense of the SCM Agreement, we consider that it is important to first clarify the exact meaning and operation of the Canadian provincial stumpage programmes in question. We will then examine whether these stumpage programmes constitute the "provision of a good" in the sense of Article 1.1(a)(1)(iii) SCM Agreement. We recall that in the interpretation of this provision we are guided by the customary rules of interpretation of public international law, as laid down in Articles 31 and 32 of the Vienna Convention on the Law of Treaties. Article 31 of the Vienna Convention on the Law of Treaties provides that "a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose".

(i) How do the stumpage programmes operate?

7.14 On the basis of the information and documents on the record of the investigation concerning the operation of stumpage programmes, including the forest legislation and various timber sales agreements submitted by Canada³⁸, and as clarified by the parties before us, we understand that most forest land in the covered provinces³⁹ of Canada is Crown land⁴⁰ and that interested persons who want to harvest on such Crown land have to enter into tenure or licensing agreements with the provincial governments.⁴¹ In general, such tenure and licensing agreements, the terms of which may vary slightly from province to province, allow the licensee or tenure holder (hereafter referred to as the "tenure holder") to harvest the standing timber on a particular parcel of Crown land. In return, the tenure holders commit themselves to a number of obligations, including at a minimum (i) service and maintenance obligations, such as road-building and maintenance, and protection against fire, disease, and insects; (ii) implementation of forestry management and conservation measures, including silviculture and reforestation; and (iii) payment of a volumetric "stumpage charge " that is levied upon the exercise of the harvesting right.

7.15 The Canadian provinces as the owners of the land and the trees standing thereon typically employ these tenure arrangements or licenses to confer rights to harvest standing timber. Canada agrees that if any company wants to log trees standing on Crown land for inter alia further processing or sale, it will have to enter into tenure or license stumpage agreements with the provincial government. Canada further acknowledges that the tenure agreements contain various processing requirements as well as certain minimum and maximum cut requirements. For example, tenure agreements in Alberta, Ontario and Qu�bec contain maximum cut limits. According to Canada, Ontario and Qu�bec have no minimum cut requirements. Canada further asserts that some of Alberta's tenures also contain minimum cut requirements, but that they are not enforced. In British Columbia, licensees under certain designated types of tenures are subject to minimum cut requirements, which require the harvester to harvest plus or minus 50 per cent of the annual allowable cut for that licensee in any given year, and plus or minus 10 per cent over a five year period.⁴²

(ii) Do stumpage programmes provide standing timber?

7.16 Canada seems to suggest that a distinction should be made between a government extending a right to take the trees from its land, and that government selling the trees as such. In our view, however, and according to the record, the trees which grow on the publicly owned Crown land are government owned.⁴³ We consider that there are a number of ways in which the government may be providing timber, by auctioning off the trees as such, by entering into short term tenure agreements or by concluding long term tenure or licence agreements. The conclusion of tenure or licence agreements is in our view one way in which the government supplies timber. When the government enters into a contract with a harvesting company whereby it allows this company to exercise this right and to cut the trees, it is in fact supplying trees, standing timber, to such companies.⁴⁴ The fact that the main purpose of the stumpage programmes is to provide trees to harvesting companies is confirmed by the various processing requirements as well as the minimum and maximum cut requirements in most stumpage agreements.⁴⁵ In fact, if a company does not cut and process a certain number of trees for a determined period of time, it risks losing the licence. We wish to note that we do not deny that the Canadian provinces may well be pursuing broader forestry management policy goals in addition to ensuring the appropriate exploitation of the forestry resources when entering into stumpage arrangements with the harvesting companies. Indeed, it is normal that when a government makes a financial contribution, including where it provides a subsidy, that there is a mix of policy objectives. However, the fact of the matter remains that, from the harvesting company's point of view, the only reason to enter into such tenure or licensing agreements is to cut trees for processing or sale. As Canada acknowledged, the main interest of tenure holders is the end-product of the harvest.⁴⁶ Ultimately, and in this context, from the tenure holder's point of view, there is no difference between receiving from the government the right to harvest standing timber and the actual supply by the government of standing timber through the tenure holder's exercise of this right.

7.17 Canada argues that even if one were to accept that the issuance of harvesting rights by the provincial governments is equal to the provinces making standing timber available to the loggers, this still does not qualify as the "provision" of a good. According to Canada, "to provide" means "to give" or "to sell" and not just "to make available". We note that both parties agree that the ordinary meaning of the verb "to provide" is "to supply".⁴⁷ Canada is right that the provinces do not provide logs to lumber producers when they make it possible for timber harvesters to harvest trees.⁴⁸ In our view, however, the issue is whether the provinces supply standing timber, not logs, to the tenure holders who harvest the trees and turn the timber into logs. In our view the only way to supply standing timber to harvesting companies is by allowing them to harvest the timber. We consider that this is precisely what the stumpage agreements do. We therefore find that standing timber is provided to the tenure holders through the provincial stumpage programmes.

7.18 In sum, and in the context of Article 1.1(a) (1)(iii) SCM Agreement, we are of the view that where a government allows the exercise of harvesting rights, it is providing standing timber to the harvesting companies.⁴⁹ From the perspective of the harvesting company the situation is clear: most forest land is Crown land, and if the company wants to cut the trees for processing or sale, it will need to enter into a stumpage contract with the provincial government, under which it will have to take on a number of obligations in addition to paying a stumpage fee for the trees actually harvested. We thus view the service and maintenance obligations, the obligations to undertake various forestry management, conservation and other measures, combined with the stumpage fees required by the stumpage agreements, as the price the tenure holder has to pay for obtaining and exercising its harvesting rights.

(iii) Is standing timber a "good"?

7.19 We recall that Article 1.1 (a) (1) (iii) SCM Agreement provides that:

"1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where: �

(iii) a government provides goods or services other than general infrastructure, or purchases goods;

7.20 We concluded above that when a provincial government enters into tenure or licence stumpage agreements, it is in fact "providing" the trees that stand on Crown land. The question we will need to answer next is whether the USDOC correctly determined that the supply of standing timber through the provincial stumpage programmes constitutes the provision of a good under Article 1.1(a)(1)(iii) SCM Agreement, in short, whether standing timber is a "good" in the sense of this provision.⁵⁰

7.21 The term "goods" has been defined in many ways in various dictionaries. Black's Law Dictionary, for example, defines "goods" as "tangible or movable personal property other than money; especially articles of trade or items of merchandise �goods and services�".⁵¹ Black's Law Dictionary adds that "[g]oods means all things, including specially manufactured goods, that are movable at the time of identification to a contract for sale and future goods. The term includes the unborn young of animals, growing crops, and other identified things to be severed from real property�".⁵²

7.22 Other dictionaries define a "good" as "personal property having intrinsic value but [usually] excluding money, securities, and negotiable instruments."⁵³ The ordinary meaning of the word "goods" is thus very broad and in and of itself does not seem to place any limits on the kinds of "tangible or movable personal property, other than money" that could be considered a "good".

7.23 In Article 1.1(a)(1)(iii) SCM Agreement, "goods" is used in the context of "goods or services other than general infrastructure". We consider that the context in which the term "goods" is used in Article 1.1(a)(1)(iii) SCM Agreement confirms the broad ordinary meaning of "goods" as tangible or movable personal property, other than money. In our view, the sentence "goods or services other than general infrastructure" refers to a very broad spectrum of things a government may provide. The fact that the only exception provided for in subparagraph (iii) is general infrastructure reinforces our view concerning the unqualified meaning of the term goods as used in this provision.

7.24 The object and purpose of Article 1.1 SCM Agreement is to provide a definition of a subsidy for the purposes of the SCM Agreement. Article 1.1(a)(1) SCM Agreement provides that the first element of a subsidy is a "financial contribution by the government". Subparagraphs (i) through (iv) then explain that a financial contribution can exist in a wide variety of circumstances including, of course, the direct transfer of funds. But subparagraphs (ii) and (iii) show that a financial contribution will also exist if the government does not collect the revenue which it is entitled to or when it gives something or does something for an enterprise or purchases something from an enterprise or a group of enterprises. Subparagraph (iv) ensures that government directed transfers effected through a private entity do not thereby cease to be government transfers.⁵⁴ In other words, Article 1.1(a)(1) SCM Agreement provides that a financial contribution can exist not only when there is an act or an omission involving the transfer of money, but also in case goods or certain services are provided by the government. In short, Article 1.1(a)(1)(iii) SCM Agreement in its context and in light of its object and purpose establishes that a financial contribution also exists in case goods or services are provided which can be valued and which represent a value to the beneficiary in question. The word "goods" in this context of "goods or services" is intended to ensure that the term financial contribution is not interpreted to mean only a money-transferring action, but encompasses as well an in-kind transfer of resources, with the exception of general infrastructure.

7.25 Canada argues that rights to exploit in situ natural resources are not covered by Article 1.1(a)(1) (iii) SCM Agreement. Canada can not point to any provision in particular in the Agreement in support of this view, but instead reaches this conclusion on the basis of a working paper from the time of the Uruguay Round negotiations which explicitly mentioned harvesting rights separately from goods or services.

7.26 We note that the text of the SCM Agreement does not in any way provide an exception for the right to exploit natural resources.⁵⁵ The only exception from the term "goods or services" provided for in Article 1.1(a)(1)(iii) SCM Agreement is general infrastructure, not natural resources. Moreover, the paper referred to by Canada in support of its argument that harvesting rights are not covered by Article 1.1(a)(1)(iii) SCM Agreement, called Discussion Paper No. 6, is an "informal discussion paper" from the Chairman of the Negotiating Group on Subsidies and Countervailing Measures dated 4 September 1990, which together with six other "informal discussion papers" was circulated in preparation for the issuance of a revised version of the Chairman's draft text of the SCM Agreement.⁵⁶ Canada argues that this Discussion Paper reflects an understanding at the time of the SCM Agreement negotiations of the fundamental difference between tangible commercial inputs and intangible real property rights.⁵⁷ We note however that, as stated in the Chairman's Note accompanying the discussion paper, this paper was circulated solely to "facilitate" discussions and that it did not reflect the Chairman's view of "what may be included in the subsequent revision", nor did it "have any status relating [it] to the Chairman's paper."⁵⁸ The Note further states that some of the views expressed in the discussion papers "are purposefully provocative in order to make evident technical complexities and/or workability (or its lack) of certain approaches."⁵⁹ In our view, this Discussion Paper thus has little if any probative value, especially in light of the fact that the reference to "harvesting rights" as separate from "goods" was not included in the final text of the Agreement.⁶⁰

7.27 Canada further argues that the reference in Article 1.1(a)(1)(iii) SCM Agreement to the provision of "goods" is to be interpreted as referring to tradable products for which there is a tariff line. Canada's argument in favour of such a very narrow interpretation of the word goods is basically that, in Canada's view, it is used throughout the GATT and WTO Agreements as an equivalent of products on which tariff concessions may be given under Article II GATT 1994.⁶¹ Canada thus submits that standing timber which is not capable of being traded across borders is not a "good".

7.28 In our view however, although in many cases the general word "good" may indeed be used as an equivalent of the term "products", this does not imply that this necessarily is always so, precisely because "goods" is a term with a broad and general meaning. Canada refers to certain provisions which contain the term "imported goods", and concludes on that basis that wherever the term "goods" is used in the Agreement, it refers to products which are capable of being imported and traded across borders. We find no basis for such a conclusion in the text of the SCM Agreement. Although "goods" in Article 1.1(a)(1)(iii) SCM Agreement certainly includes tradable products, there is no reason to limit its meaning to only such products, particularly where the immediate context in which the term is used does not suggest such a limitation. In particular, this provision states that when the government provides "goods or services", this constitutes a financial contribution. The "goods" in question are not imported or exported, simply provided by the government, and nothing suggests therefore that the goods in question need to be tradeable products with a potential or actual tariff line. Goods in this context are distinguished from services, and in our view the two cover the full spectrum of in-kind transfers the government may undertake by providing resources to an enterprise. Our view is reinforced by the fact that there is only one exception among all possible goods and services that could be provided by the government - general infrastructure - which is explicitly defined as not constituting a financial contribution. We thus find that there is no basis in the text of the SCM Agreement to conclude that "goods" in Article 1.1 is limited to products with an actual or potential tariff line.

7.29 In sum, we find that through the Canadian provincial government stumpage programmes, Crown timber is being supplied to the tenure holders. Standing timber is the valuable input for logs which may be processed by sawmills into softwood lumber.⁶² In light of our finding that there is no basis in the text of the SCM Agreement to limit the term "goods" to tradeable products with a potential or actual tariff line, we consider that standing timber, trees, are goods in the sense of Article 1.1(a)(1)(iii) SCM Agreement.⁶³

(c) Conclusion

7.30 We therefore conclude that the Canadian provincial stumpage programmes involve the provision by the government of standing timber and, as such, the provision of a good in the sense of Article 1.1(a)(1)(iii) SCM Agreement. We therefore find that the USDOC determination that the provision of stumpage constituted a financial contribution, in the form of the provision of a good or service, is not inconsistent with Article 1.1 SCM Agreement, and therefore reject Canada's claims in this respect.

26 Canada uses this term to refer to the "right to harvest standing timber on Crown land". Canada's First Written Submission, para. 18.

27 This claim by Canada related to the exclusion of the Maritime provinces from the country-wide duty rate. In response to a question from the Panel after the second meeting, Canada stated that it was "no longer pursuing its claims in respect of the �Maritimes� question in this proceeding". Canada's Answers to Questions from the Panel after the Second Meeting, para. 69. In light of this statement, we consider that there is no need for us to address this claim, and neither will we make any ruling in respect of this claim.

28 The USDOC Preliminary Determination equates stumpage to the provision of a good. See USDOC Preliminary Countervailing Duty Determination ("USDOC Preliminary Determination"), 66 Fed. Reg., p. 43,192. (Exhibit CDA-1). Canada submits that Commerce�s legal analysis and conclusion with respect to the requirement of a �financial contribution� consists, in its entirety, of two sentences:

"We preliminarily determine that the provision of stumpage by the provincial governments constitutes the provision of a good or service under section 771(5)(D)(iii) of the [Tariff Act of 1930, as amended]. Thus, we preliminarily determine that the provincial governments have provided a financial contribution as defined under section 771(5)(D) of the Act to Canadian softwood lumber producers."