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

Report of the Panel

(Continued) 

5. Claim 4: impermissible application of a provisional duty in excess of the subsidy rate

(a) Arguments of the parties

(i) Canada

7.80 Canada argues that the US calculated the subsidy rate of 19.31 per cent ad valorem on a first mill basis, but applied it on an entered value basis with the effect of significantly increasing the provisional measures applied to a considerable portion of Canadian exports of softwood lumber to the United States. Canada argues that in all of the subsidy calculations, the denominator was the value of sawmill (first mill)¹²² exports. Nevertheless, in a decision memorandum¹²³ accompanying the USDOC's instructions to Customs, the USDOC claims that the record for the Preliminary Determination supports the collection of countervailing duty deposits on an entered value basis. Canada submits that this practice implies that the importer of the value-added product faces an actual duty of above 19 per cent of the first mill value. This application of a duty in excess of the rate is inconsistent with the SCM Agreement.

7.81 Canada asserts that the statement by Statistics Canada on which the USDOC based its decision in this regard, which stated that the data provided related to both first-mill and "re-manufacturers" reflects a typographical error. Canada argues that, in actuality, the statement which caused the alleged confusion intended to say that "it was not possible to exclude 're-manufactures from its results." Canada argues that the actual calculation methodology in the survey makes clear that the data provided were in fact from a survey of "sawmills" (also noted as "first mills"), and that the discussion of the methodology further intended to explain that the data also included a small portion of remanufactured products that were produced by the sawmills. According to Canada, this is because Statistics Canada stated that it was unable to isolate the small portion of further millwork or value added that was performed within the sawmills, and therefore, such values were included in the reported data. Canada argues that it explained this clearly in its 21 August and 27 August submissions to the USDOC, prior to the time at which the USDOC issued its Customs instructions implementing the decision on a final mill basis.¹²⁴ However, Canada submits, even though Canada had fully explained that the data used in the preliminary calculations did not contain any final mill sales, the United States applied provisional measures on a final mill basis.

(ii) United States

7.82 The United States submits that the USDOC calculated the duty based on the total value of all sales (first mill and remanufactured) which was the information requested from and provided by Canada in the Questionnaire.¹²⁵ The US argues that the Canadian argument is flawed since the USDOC at the time of making its determination did not know and could not know that the information provided by Canada only referred to first mills, since Canada only informed the USDOC of this for the first time after the Preliminary Determination. As this is evidence and information not before the USDOC at the time of the determination, the Panel cannot take it into account when reviewing the USDOC's Preliminary Determination.¹²⁶

(b) Analysis

7.83 In light of our finding above concerning the USDOC's incorrect determination of the amount of benefit which formed the basis for the calculation of the countervailing duty rate, we consider that it is not necessary for us to address this claim in order to resolve the dispute before us and we therefore decide to apply judicial economy in respect of this claim.

6. Conclusion on Canada's claims relating to the Preliminary Countervailing Duty Determination.

7.84 In light of our conclusions above that the USDOC Preliminary Countervailing Duty Determination

• was not inconsistent with Article 1.1(a) SCM Agreement when it found that the provision of stumpage constituted a financial contribution, in the form of the provision of a good or service;
   
• failed to determine the existence and amount of benefit to the producers of the subject merchandise on the basis of the prevailing market conditions in Canada as required by Article 1.1 (b) and Article 14 and 14(d) SCM Agreement; and
   
• failed to establish that a benefit in the sense of Article 1.1 (b) SCM Agreement was conferred to certain producers of the subject merchandise, since the USDOC did not examine whether a benefit was passed through by the unrelated upstream producers of log inputs to the downstream producers of the subject merchandise;

we conclude that the USDOC' s imposition of provisional countervailing measures was inconsistent with the US' obligations under Articles 1.1 (b), 14, 14 (d) SCM Agreement as well as Articles 10 and 17.1 (b) of the SCM Agreement, as these provisional measures were imposed on the basis of an inconsistent preliminary determination of the existence of a subsidy.¹²⁷ We do not consider it necessary to address Canada's additional claims regarding the consistency of USDOC' s actions with Articles 17.2, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994. In light of our conclusions above, we do not find it necessary either to rule on Canada's claim that the USDOC instructions transmitted to the United States Customs Service on 4 September 2001, imposed provisional measures in excess of the subsidy preliminarily found to exist in a manner inconsistent with Articles 10, 17.2, 17.5, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994.

B. CLAIMS RELATING TO THE PRELIMINARY CRITICAL CIRCUMSTANCES DETERMINATION AND THE RETROACTIVE APPLICATION OF PROVISIONAL COUNTERVAILING MEASURES

7.85 The second set of claims of Canada relates to the USDOC Preliminary Critical Circumstances Determination which formed the basis for the retroactive application of provisional measures in this case. Canada argues, first , that the SCM Agreement does not under any circumstances allow for the retroactive application of provisional measures, and thus considers that the USDOC Preliminary Critical Circumstances Determination is inconsistent with the SCM Agreement. In addition, Canada argues that the retroactive application of the provisional measures violated the disciplines of Article 17 SCM Agreement. Finally, Canada submits that, in any event, and even if we were to find that the SCM Agreement would in certain circumstances allow for the retroactive application of provisional measures, the USDOC failed to establish the existence of critical circumstances which would have justified the retroactive application of the provisional measures in question.

1. Claim 1: retroactive application of provisional measures is inconsistent with Article 20.6 SCM Agreement and violates Article 17.3 and 17.4 SCM Agreement.

(a) Arguments of the parties

(i) Canada

7.86 Canada is challenging the USDOC Preliminary Critical Circumstances Determination on the basis of which the United States retroactively applied the provisional measures to entries occurring 90 days prior to the date of publication of the preliminary determinations, i.e. entries occurring in the period of May 19 through August 16, 2001.

7.87 According to Canada, a retroactive application of provisional measures inevitably violates Article 20.6 SCM Agreement as this provision only allows for the retroactive application of definitive duties. Canada argues that the plain and ordinary meaning of the terms of Article 20.6 SCM Agreement, read in context and in the light of the object and purpose of the provision, make clear that only definitive countervailing duties, if warranted, can be applied retroactively, and that retroactive application of provisional measures is simply not permitted. In addition, Canada argues that Article 17.3 SCM Agreement provides that provisional measures shall not be applied sooner than 60 days from the date of initiation of the investigation. Due to the Preliminary Critical Circumstances Determination, provisional measures in this case were applied to entries occurring within 90 days prior to the date of publication of the Preliminary Determination (17 August 2001), i.e. as of 19 May 2001. As a consequence, the date of application of provisional measures in this case was less than a month after the initiation (23 April 2001), thereby violating Article 17.3 SCM Agreement, which provides that provisional measures shall not be applied sooner than 60 days from the date of initiation of the investigation. In addition, Canada submits that Article 17.4 SCM Agreement provides that the maximum period of application of provisional measures is 4 months following the Preliminary Determination. According to Canada, as the US applied provisional duties retroactively for 90 days in addition to the 4 month period following the Preliminary Determination, provisional measures were applied for almost 7 months thereby violating Article 17.4 SCM Agreement. Accordingly, Canada argues, not only is the retroactive application of provisional measures not permitted under Article 20.6 SCM Agreement, but any such action by the United States also constitutes a violation of Article 17.3 and 17.4 of the SCM Agreement.

7.88 Canada therefore considers the USDOC's Preliminary Critical Circumstances Determination to be inconsistent with Articles 17.1(b), 17.3, 17.4, 17.5, 19.4 and 20.6 of the SCM Agreement.

(ii) United States

7.89 The United States is of the view that the retroactive application of provisional measures, in this case in the form of suspension of liquidation and the posting of a bond or cash deposits, is allowed under Article 20 SCM Agreement. The United States argues that both suspension of liquidation of import entries and the posting of bonds or cash deposits are necessary to ensure that it retains the possibility of exercising the right to retroactive relief provided for in Article 20.6 SCM Agreement. Suspension of liquidation alone would not be sufficient, the United States asserts, since, if no amount is guaranteed by a cash deposit or bond, Article 20.3 SCM Agreement would, on its face, preclude the collection of duties retroactively. The retroactive application of provisional measures is thus necessary, according to the US, to preserve the possibility and the ability to exercise the retroactive definitive remedy.¹²⁸ According to the United States, Article 20 SCM Agreement provides an exception to the timing provisions of Article 17.3 and 17.4 SCM Agreement relating to the maximum duration of the provisional measures and the earliest possible date of application of such measures. The US argues that Article 20.1 and 20.6 SCM Agreement establish an exception which, although not altering the date when provisional measures may be imposed, expands the universe of "entries" of the subject merchandise to which those measures apply.¹²⁹

7.90 In sum, according to the United States, where provisional measures are imposed in accordance with the requirements of Article 17 SCM Agreement (i.e. after preliminary determinations of subsidization and injury), Article 20.1 SCM Agreement permits a Member to expand the scope of these provisional measures to encompass entries during the 90 days prior to the preliminary determination if there is sufficient evidence that the circumstances described in Article 20.6 SCM Agreement exist.

(b) Analysis

(i) Does Article 20.6 SCM Agreement allow for the retroactive application of provisional measures?

7.91 The USDOC made a preliminary determination of the existence of critical circumstances on the basis of which it ordered the retroactive application of provisional measures. The USDOC accordingly directed the US Customs Service to suspend liquidation of all entries of the subject merchandise from Canada, entered or withdrawn from warehouse for consumption on or after 90 days prior to the date of publication of the Preliminary Determination, and instructed Customs to require a cash deposit or bond for such entries of the subject merchandise.¹³⁰ The US argues that both suspension of liquidation and the posting of bonds or cash deposits are necessary to ensure the possibility of exercising the right to retroactive definitive relief provided for in Article 20.6 SCM Agreement. Thus, for the US, the USDOC Preliminary Critical Circumstances Determination is consistent with Article 20.6 SCM Agreement.

7.92 Article 20 SCM Agreement provides as follows:

Article 20

Retroactivity

20.1 Provisional measures and countervailing duties shall only be applied to products which enter for consumption after the time when the decision under paragraph 1 of Article 17 and paragraph 1 of Article 19, respectively, enters into force, subject to the exceptions set out in this Article.

20.2 Where a final determination of injury (but not of a threat thereof or of a material retardation of the establishment of an industry) is made or, in the case of a final determination of a threat of injury, where the effect of the subsidized imports would, in the absence of the provisional measures, have led to a determination of injury, countervailing duties may be levied retroactively for the period for which provisional measures, if any, have been applied.

20.3 If the definitive countervailing duty is higher than the amount guaranteed by the cash deposit or bond, the difference shall not be collected. If the definitive duty is less than the amount guaranteed by the cash deposit or bond, the excess amount shall be reimbursed or the bond released in an expeditious manner.

20.4 Except as provided in paragraph 2, where a determination of threat of injury or material retardation is made (but no injury has yet occurred) a definitive countervailing duty may be imposed only from the date of the determination of threat of injury or material retardation, and any cash deposit made during the period of the application of provisional measures shall be refunded and any bonds released in an expeditious manner.

20.5 Where a final determination is negative, any cash deposit made during the period of the application of provisional measures shall be refunded and any bonds released in an expeditious manner.

20.6 In critical circumstances where for the subsidized product in question the authorities find that injury which is difficult to repair is caused by massive imports in a relatively short period of a product benefiting from subsidies paid or bestowed inconsistently with the provisions of GATT 1994 and of this Agreement and where it is deemed necessary, in order to preclude the recurrence of such injury, to assess countervailing duties retroactively on those imports, the definitive countervailing duties may be assessed on imports which were entered for consumption not more than 90 days prior to the date of application of provisional measures." (emphasis added)

7.93 As its text indicates, Article 20.1 SCM Agreement provides that provisional measures and countervailing duties shall only be applied to products entering the country following the imposition of such measures, "subject to the exceptions set out in this Article". While Article 20.2 and Article 20.6 SCM Agreement provide for explicit exceptions in the case of the definitive countervailing duties, we find no similar exceptions relating to provisional measures. Article 20.2 SCM Agreement sets forth the circumstances in which definitive countervailing duties may be applied retroactively for the period during which provisional measures were applied.¹³¹ Similarly, in critical circumstances, Article 20.6 SCM Agreement allows for the definitive duties to be assessed on imports which entered the country from 90 days prior to the date of application of the provisional measures.

7.94 Pursuant to the Preliminary Critical Circumstances Determination, the USDOC ordered the retroactive imposition of provisional measures in the form of the suspension of liquidation and a cash deposit or bond requirement. The US acknowledges in this dispute that such measures constitute provisional measures within the meaning of Article 17 SCM Agreement.¹³² We are of the view that the only two exceptions to the general rule of non-retroactivity of Article 20.1 SCM Agreement as set forth in Article 20.2 and 20.6 SCM Agreement do not apply to provisional measures, but concern definitive countervailing duties only. On the basis of the clear language in the SCM Agreement, we therefore consider that the general rule of non-retroactivity applies to provisional measures, without exceptions. We therefore find that the retroactive application of the provisional measure imposed by the USDOC is inconsistent with Article 20.6 SCM Agreement.

7.95 We agree with the United States that a Member is allowed to take measures which are necessary to preserve the right to later apply definitive duties retroactively. In our view, an effective interpretation of the right to apply definitive duties retroactively requires that a Member be allowed to take such steps as are necessary to preserve the possibility of exercising that right. What kind of measures may thus be taken by the Member concerned will have to be determined on a case-by-case basis. In this case, the US argues that both suspension of liquidation and the posting of a cash deposit or bond are necessary for the US authorities to be able to collect the duties retroactively. According to the United States, without suspension of liquidation, the products will have definitively entered the country and no duties can be assessed on such entries after liquidation. The United States further argues that the posting of a bond or a cash deposit is equally necessary because Article 20.3 SCM Agreement would not allow the retroactive duty collection beyond the amount guaranteed by the cash deposit or bond. In the view of the United States, if no cash deposit or bond is required, Article 20.3 SCM Agreement would imply that no definitive countervailing duty for the period preceding the Preliminary Determination could be levied either.

7.96 We are not convinced by the US argument in respect of the posting of cash deposits or bonds. We consider that Article 20.3 SCM Agreement states that if the amount guaranteed by the cash deposit is lower than the definitive countervailing duty, the difference shall not be collected. If the reverse is true, the excess amount shall be reimbursed and the bond released in an expeditious manner. Article 20.3 SCM Agreement thus concerns the wholly different issue of how to deal with a discrepancy between the provisional and the final rates of the countervailing duty. It does not address the retroactive imposition and collection of definitive duties for the period before the application of provisional measures. Article 20.6 SCM Agreement provides that definitive duties may in certain circumstances be assessed on imports which were entered for consumption from 90 days prior to the date of application of provisional measures.

7.97 The text thus clearly indicates that the Agreement allows for the retroactive application of definitive duties at a time when no provisional measures were in place and thus no provisional duties were collected. To accept the US argument that Article 20.3 SCM Agreement would preclude a Member from collecting definitive duties for the period prior to the date of application of provisional measures, would mean that a Member doing what Article 20.6 SCM Agreement expressly allows for, would be violating the Agreement nevertheless. We cannot accept an interpretation which leads to this contradictory result. We consider that the principle of effective treaty interpretation requires the treaty interpreter to "read all applicable provisions of a treaty in a way that gives meaning to all of them, harmoniously."¹³³

7.98 We therefore find that the USDOC retroactive application of provisional measures is inconsistent with Article 20.6 SCM Agreement, as this provision allows for the retroactive application of definitive duties only. In our view, and leaving aside the question which sorts of actions of a conservatory nature a Member would be allowed to take in order to preserve the right to apply definitive duties retroactively, provisional measures such as the requirement of a cash deposit or the posting of a bond are not necessary to preserve the right to apply definitive duties retroactively under the SCM Agreement.¹³⁴

(ii) Does the retroactive application of provisional measures also violate the disciplines of Article 17 SCM Agreement.

7.99 We next turn to Canada's claim pursuant to Article 17.3 and 17.4 SCM Agreement in respect of the date of application and the duration of the provisional measures in this case. These provisions read as follows:

"17.3 Provisional measures shall not be applied sooner than 60 days from the date of initiation of the investigation.

17.4 The application of provisional measures shall be limited to as short a period as possible, not exceeding four months".

7.100 In our view, Article 17.3 and 17.4 SCM Agreement are unambiguous, clearly specifying that provisional measures shall not be applied sooner than 60 days after initiation and their application shall be limited to maximum 4 months. Article 20.1 SCM Agreement provides that provisional measures may be applied only to products which entered the country after the time when the decision under paragraph 1 of Article 17 SCM Agreement was taken, subject to the exceptions set out in that Article. In respect of the starting-point for the application of provisional and final measures, Article 20 SCM Agreement thus establishes two exceptions to the general rule of non-retroactivity of final countervailing duties and no exceptions to the general rule of non-retroactivity of provisional measures. Nothing in Article 20 SCM Agreement provides an exception to the rules relating to the minimum period between initiation and application of provisional measures or the maximum period of application of such measures as provided for in Article 17.3 and 17.4 SCM Agreement.

7.101 The USDOC initiated its countervailing duty investigation on 23 April 2001, and applied retroactive provisional measures on imports entering from 19 May 2001, i.e. less than 60 days after initiation. The USDOC applied provisional measures on imports entering from 19 May 2001, until 14 December 2001, which is 4 months after the Preliminary Determination. In total, the provisional measure thus covered imports for a period of almost 7 months. We therefore find that the US application of provisional measures during the period prior to the 60 days after initiation, and for longer than 4 months is inconsistent with Article 17.3 and 17.4 SCM Agreement.

7.102 We consider that the US argument that the period of application in Article 17.4 SCM Agreement refers to the period during which cash deposits or bonds are taken rather than the period during which the affected imports enter for consumption would have the effect of nullifying the provision, particularly in light of Article 20.1 SCM Agreement. We cannot accept such an interpretation which would reduce a provision of the treaty to redundancy or inutility.¹³⁵ The US interpretation would allow significantly more than 4 months worth of entries to be covered by a provisional measure. For example, under this interpretation, a decision under Article 17.1 SCM Agreement could be taken after 60 days, following which the importing country would wait say 3 months before "applying" the provisional measures for 4 months, including retroactively to imports entering after the date of the decision. In our view this would render meaningless the disciplines imposed by Article 17 SCM Agreement.

(c) Conclusion

7.103 In sum, we find that the United States' application of provisional measures in the form of cash deposits or bonds under the USDOC Preliminary Critical Circumstances Determination is inconsistent with Article 20.6 SCM Agreement, as this provision does not allow for the retroactive application of provisional measures. In addition, we find that the provisional measures at issue were applied in violation of Article 17.3 and 17.4 SCM Agreement as they were imposed less than 60 days after initiation and covered imports for a period of more than four months.

2. Claim 2: USDOC failed to establish critical circumstances under Article 20.6 SCM Agreement

(a) Arguments of the parties

(i) Canada

7.104 Canada argues that even if, in theory, retroactive application of provisional measures were permitted under Article 20.6 SCM Agreement, the USDOC Preliminary Critical Circumstances Determination is still inconsistent with Article 20.6 SCM Agreement since the USDOC failed to establish the existence of critical circumstances.

7.105 Canada asserts that the Investissement Quebec Small and Medium Businesses Guarantee programme (the "IQ SMB" programme) upon which the USDOC Preliminary Critical Circumstances Determination was based is not a prohibited export subsidy, as it is contingent upon developing markets outside Quebec, not outside Canada. Therefore the determination that the alleged massive imports have benefitted from subsidies bestowed inconsistently with the provisions of GATT 1994 and of the SCM Agreement is, in Canada's view, flawed. In any case, Canada submits, even if the IQ SMB programme were a prohibited subsidy, the amount of the subsidy found (0.005 per cent) is de minimis . Canada argues that Article 11.9 SCM Agreement provides that a de minimis rate is an insufficient basis for applying any countervailing measure whether final or provisional, and the determination was thus made in the absence of any critical circumstances in the sense of Article 20.6 SCM Agreement.¹³⁶

7.106 Canada argues that even if the IQ SMB Guarantee programme were a prohibited export subsidy, Articles 17.5 and 19.4 SCM Agreement, as well as Article 20.6 SCM Agreement, require that the rate to be applied retroactively to this programme should have been no more than the rate of subsidization under this programme, i.e. 0.005 per cent rather than the country-wide rate of 19.3 per cent. Canada argues that the text of Article 20.6 SCM Agreement allows for the retroactive application of only the rate that is commensurate with the benefit bestowed by the alleged prohibited subsidy. By applying a duty at this higher rate, the US countervailed to an amount in excess of that required to "preclude the recurrence of the injury" caused by such subsidies in "critical circumstances", which is the object and purpose of Article 20.6 SCM Agreement. The US thus violated Article 20.6 SCM Agreement as well as Articles 17.5 and 19.4 SCM Agreement.

7.107 Canada further asserts that countervailing measures were applied retroactively without a finding by USDOC or USITC of "injury which is difficult to repair" or that the retroactive application of the duties was "necessary to preclude the recurrence of such injury" in violation of the explicit requirements of Article 20.6 SCM Agreement. Canada adds that the USDOC itself admitted as much, as it acknowledged that these findings would have to be made by the USITC at the time of the final critical circumstances determination.¹³⁷

7.108 Canada submits that the USDOC's finding of "massive imports" is flawed as it is based on all imports from Canada while the SMB subsidy programme applies only to shipments from Quebec. Moreover, in Canada's opinion, the increase in imports of 23.34 per cent following the petition was not due to the alleged export subsidy of a de minimis level but rather to the anticipated and then actual expiration of the Softwood Lumber Agreement between the US and Canada, which first sharply reduced exports in the first quarter of 2001 and whose actual expiry led to an increase in the second quarter. Canada submits that the retroactive application of provisional measures in the absence of "massive imports of a product benefitting from subsidies paid or bestowed inconsistently with the GATT 1994 and the SCM Agreement" is in violation of Article 20.6 SCM Agreement.

7.109 Canada finally argues that if it is permissible to include for purposes of determining massive imports, shipments that have not benefitted from the prohibited subsidy, an authority should include all such shipments and not just the portion of such shipments that an authority needs in order to find a high rate of subsidization. Canada asserts that the finding of "massive imports" violates Article 20.6 SCM Agreement, as it did not include all shipments from Canada, but rather excluded imports from the Maritime provinces, which would have resulted in a negative "massive imports" finding under the SCM Agreement.

(ii) United States

7.110 The United States argues that there existed a sufficient basis for a preliminary critical circumstances determination, especially as in its view the evidentiary standard in the case of a preliminary determination should be lower than in case of a final determination.

7.111 According to the US, one Canadian provincial subsidy programme was an Article 3- inconsistent export subsidy which was meant to promote economic development in Quebec by encouraging growth of exports. The US argues that the existence of a prohibited export subsidy suffices to preserve the possibility of retroactive application later, and the fact that this programme's subsidy rate was de minimis is not relevant in this respect.

7.112 The US further submits that, as no methodology is prescribed in the SCM Agreement for determining the existence of "massive imports", it was reasonable for the USDOC to consider an increase of 23 per cent as massive. The US notes that the USDOC's analysis in this respect took the expiration of the Softwood Lumber Agreement between Canada and the US into account and came to the conclusion that it did not have the distorting effect Canada is alleging.

7.113 The US finally notes that the USITC had already made a preliminary finding of injury before the USDOC made its Preliminary Critical Circumstances Determination. According to the US, the remaining conditions for the retroactive application of definitive duties, relating to injury which is difficult to repair, are necessarily determinations that can only be made at the time of the final determination. For the purpose of the Preliminary Critical Circumstances Determination and the retroactive application of provisional measures, the preliminary determination of injury by the USITC was sufficient.

(b) Analysis

7.114 Canada argues that "[e]ven if the Panel found that provisional measures could be applied retroactively under Article 20.6, Commerce had not established the existence of any or all of the elements required under that provision"¹³⁸ In light of the fact that we uphold Canada's principal claim by finding that the Agreement does not allow for the retroactive application of provisional measures, we do not consider it necessary for the resolution of the dispute before us to address the arguments made by the parties concerning the specific hypothetical conditions that would need to be met for such inconsistent measures to be applied. For this reason we apply judicial economy and do not rule on this claim.

3. Conclusion on Canada's claim concerning the USDOC Preliminary Critical Circumstances Determination

7.115 In light of the conclusions above, we find that the United States' retroactive imposition of provisional measures on the basis of the USDOC Preliminary Critical Circumstances Determination is inconsistent with Article 20.6 SCM Agreement, as there does not exist a basis for the retroactive application of provisional measures in the SCM Agreement. Moreover, the retroactive application of provisional measures in the form of a cash deposit or bond in this case violated Article 17.3 and 17.4 SCM Agreement, as the measures covered imports for a period of almost seven months and were applied before sixty days after the initiation of the investigation. In light of this finding, we do not consider it necessary or appropriate to examine Canada's claims with regard to a violation of Articles 17.1 (b), 17.5 and 19.4 SCM Agreement and Article VI:3 GATT 1994.

122 Sawmills produce lumber from logs and ship the lumber to either end-users or downstream value-added re-manufacturers (final mills) that use lumber inputs and produce further processed lumber products..

123 Memorandum from M.G. Skinner, Director, Office of AD/CVD Enforcement VI to B.T. Carreau, Deputy Assistant Secretary, AD/CVD Enforcement, re �Basis of the Countervailing Duty Deposit Rate,� dated 31 August 2001, p. 3. (Exhibit CDA-31)

124 See, e.g., Letter from Weil, Gotshal & Manges, counsel for the Government of Canada, to the Department of Commerce regarding Certain Softwood Lumber Products from Canada: StatsCan Data Based on �First Mill� Values, dated 21 August 2001 (Exhibit CDA-96), where Canada explained:

Confusion on this issue arose as a result of a statement in the GOC Questionnaire Response that, �[b]ecause the MSM does not collect commodity data, it was not possible to exclude �re-manufacturers� from its results.� See Questionnaire Response on Behalf of the GOC, Volume I, Exhibit GOC-GEN-2 (�Calculation Methodology Summary�) (28 June 2001) [Exhibit US-13]. As was explained in the meeting with the Department, however, this statement does not mean that the data on the record relate to any manufacturers other than �sawmills.� Rather, when read in context (i.e., in relation to the Monthly Survey of Manufacturing for the Sawmills industry), the explanation simply indicates that, if a primary sawmill performed additional manufacturing within its own mill, such additional millwork would be included in the data, because commodity details on the production of sawmills are not broken out in the survey. Any such further processed products of the sawmills would, moreover, be �first mill� products. As is demonstrated in the Attachment to this letter, the reported StatsCan data, which was limited to NAICS subsection 321111, do not contain any sales or production information for �remanufacturers.�