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UNDER THE UNCITRAL ARBITRATION RULES AND
SECTION B OF CHAPTER 11 OFTHE NORTH AMERICAN F1u~ETRADE AGREEMENT
CANFOR CORPORATION(“Canfor”)
V.
Investor(Claimant)
THE GOVERNMENT
OFTHE UNITED STATES OF AMERICA
(“Respondent”)
NOTICE OF ARBITRATIONAND
Party(Respondent)
STATEMENT OF CLAIM
Pursuantto Articles 1116 and 1120 of the North American Free Trade Agreement(“NAFTA”), Canfor, Submitsthefollowing Claim to Arbitration.
DAVIS & COMPANY2800-666BurrardStreetVancouver,British ColumbiaV6C 2Z7
P. John LandryPhoneFax
604-643-2935604-605-3588
Keith E.W. MitchellCOUNSEL TO CANFORCORPORATION
Phone 604-643-2958604-605-3792Fax
NoticeofArbitration andStatementofClaim - Canfor Corporation
INDEX
Page
DISPUTING PARTIES I
II. PROCEDURALHISTORY i
III. FACTS 2
A. Canforandits BusinessOperations 2
(i) CanforGroup 2(ii) CanforGroup’sCanadianOperations 3(iii) CanforGroup’sUnitedStatesOperations 4
B. Historical Context 5
(i) Lumber I 6(ii) LumberII 7(iii) Actions following LumberII 9(iv) LumberIII 10(v) Actions following LumberIII 16(vi) Byrd Amendment 17
(vii) ImmediateContext LumberIV 18
(a) Allegations in the Petitions 18(b) ITC andDOC PreliminaryDeterminations 18(c) ITC andDOC Final Determinations 19(d) DOC’sAnalysis - PD-CVD 19(e) DOC’s Analysis - Canfor’srequestfor a
companyspecificsubsidyrate 23(1) DOC’sAnalysis - PD-CC 24(g) DOC’s Analysis - FD-CCandFD-CVD 25(h) DOC’s Analysis - FD-ADD 26
IV. VIOLATIONS OF THE NAFTA 26
A. Overviewof RelevantProvisionsof NAFTA 26
(i) NAFTA Article 1102 26(ii) NAFTA Article 1103 27
NoticeofArbitration andStatementofClaim - Canfor Corporation
(iii) NAFTA Article 1105 29(iv) NAFTA Article 1110 30
B. VIOLATIONS OFNAFTA BY THE RESPONDENT 30
(i) Overview 30(ii) Violations of NAFTA — PD-CVD 31
(a) Overview 31
(I) DOC Determinationthat provincialstumpageprogramsprovidea financialcontribution 32
(2) DOC Determinationthat provincialstumpageprogramsprovideabenefit 33
(3) OtherDOC Determinationswhich resultinviolationsof NAFTA 35
(iii) Violations of NAFTA — PD-CC 36(iv) Violations of NAFTA — PD-ADD 37(v) Violations of NAFTA — FD-CVD 39(vi) Violations of NAFTA — FD-ADD 40(vii) Violations of NAFTA — Denial of dueprocess 42
(a) Burdennot met to implementinterim remedybeforefullhearingon merits 42
(b) Canfordeniedaccessto independentandimpartialdecisionmaker 43
(c) Canfordeniedfundamentalfairnessandequity 43(d) Canfordeniedanopportunityto obtaincompany
specificCVD rate 44
(viii) Violations of NAFTA — Byrd Amendment 46(ix) The Respondent’sActions areanExpropriation 50
IV. DAMAGE 49
V. POINTSAT ISSUE 50
VI. RELIEF OR REMEDY SOUGHT 50
NoticeofArbitration andStatementofClaim - Canfor Corporation
APPENDIX 51
Article 1102: NationalTreatment SiArticle 1103: Most-FavouredNation Treatment 51Article 1105: Minimum Standardof Treatment 52Article 1110: Expropriation 52
Notice ofArbitration and StatementofClaim - Canfor Corporation 1
I. DISPUTING PARTIES
1. The Claimant,CANFORCORPORATION, (“Canfor”) is a companyincorporated
underthelawsof British Columbia,with its headoffice in Canadaat 2900 - 1055Dunsmuir
Street,Vancouver,British Columbia, Canada,V7X 1B5, and its addressfor serviceof
documentsin connectionwith thisproceedingis do DAVIS & COMPANY, Suite2800-666
BurrardStreet,Vancouver,British Columbia,Canada,V6C 2Z7, Attention: P. JohnLandry
(Telephone:604-643-2935~Facsimile: 604-605-3588). Canfor herebydemandsthat this
disputebereferredto arbitration.
2. The Respondent,GOVERNMENT OF THE UNITED STATES OF AMERICA,
(“Respondent”),is aPartyto theNorthAmericanFreeTradeAgreement(“NAFTA”), entered
betweenthe Governmentsof Canada,the UnitedStatesandthe UnitedMexican States
effectiveJanuary1, 1994. The addressof the Governmentof the United States,for the
purposesof this proceedingis do Office of theLegalAdviser,UnitedStatesDepartmentof
State,Room 5519, 2201 C Street,NW, WashingtonDC 20520.
II. PROCEDURAL HISTORY
3. Pursuantto NAFTA Articles 1116and 1119,on November5, 2001,Canfordelivered
to the Respondenta Notice of Intent to Submita Claim to Arbitration, thus putting the
Respondenton notice of Canfor’sallegationthat the Respondent’sconductin connection
with, amongstother matters, preliminary determinationsissued by the United States
Departmentof Commerce(“DOC”) in respectof petitions(“Petitions”) filed with theDOC
andwith theUnitedStatesInternationalTradeCommission(“ITC”) allegingthattheUnited
Statessoftwoodlumberindustry wasmaterially injuredor threatenedwith material injury
through importsof subsidizedanddumpedsoftwood lumber from Canada,violated the
Respondent’sobligationsunderChapterIi of NAFTA.
NoticeofArbitration andStatementof Claim - Canfor Corporation
4. Consultationsbetweenthe disputingpartiescontemplatedby NAFTA Article 1118
occurredin Washington,DC, on December18, 2001 but thoseconsultationsfailedto settle
theclaim.
5. This Noticeof Arbitration is submittedunderSectionB of Chapter11 of NAFTAand
the UNCITRAL Arbitration Rules. The contractwhich this disputearisesout of or in
relationto is Chapter11 of NAFTA. As providedfor in Article 1123,thedisputingparties
not havingagreedotherwise,Canforproposesthat this proceedingbe adjudgedby three
arbitrators.
6. Canforhasconsentedto thesubmissionof this claim to arbitration. Canfor,Canfor
USACorporation(“CanforUSA”), CanadianForestProductsLtd. (“CFP”),andCanforWood
ProductsMarketingLtd. (“CanforWood Products”)waivetheirrights to initiateor continue
before any administrativetribunal or court under the law of any Party, or other dispute
settlementprocedures,anyproceedingswith respectto themeasuresof the UnitedStates
that are allegedto be a breachreferredto in Article 1116, except for proceedingsfor
injunctive,declaratoryor otherextraordinaryrelief, not involving thepaymentof damages,
beforeanadministrativetribunalor courtunderthelaw of theUnitedStates. Copiesof the
consentand waivers, made in writing on May 23, 2002 are attachedto this Notice of
Arbitration andStatementof Claim andaredeliveredwith it to theRespondent.
Ill. FACTS
A. Canforandits BusinessOperations
(i) Canfor Group
7. Canforis a British Columbiacompanycarryingon businessworld-wide in theforest
productsindustry. CFPis a British Columbiacompanyandis awholly ownedsubsidiaryof
Canfor. CanforUSA is a Washingtoncorporationandis a wholly ownedsubsidiaryof CFP.
NoticeofArbitration andStatementof Claim - Canfor Corporation 3
8. Canfor,directlyor throughits subsidiaries,employsapproximately5,760peoplein
its forest productsand affiliated operations. The Canfor Group’s (ie., Canfor and its
subsidiaries,including CFP, CanforUSA, andCanfor Wood Products)majorproductsare
softwoodlumber,pulp,specialtykraft paper,newsprint,plywood,hardboardandlogs. These
productsareexportedfrom Canada,primarily to theUnitedStates,Europe,andtheFarEast.
TheCanforGroupis thelargestproducerin Canada,andthelargestexporterto theUnited
States,of softwoodlumber.
(ii) Canfor Group’s Canadian Operations
9. The CanforGroupoperateselevensawmillsandtwo whole log chipping facilities in
the northerninterior of British Columbia,two sawmills in Alberta and a plywood mill in
Prince George, British Columbia. It also manufacturesbleached,semi-bleachedand
unbleachedkraft pulp andbleached,andunbleachedkraft paperatits pulp facilities located
in PrinceGeorge.
10. In addition to these facilities the Canfor Group has the following secondary
manufacturingoperationsin Canada:
(a) finger-joint mills; oneattachedto its Clear Lake sawmill in the interior of
British Columbia,oneattachedto its GrandPrairie,Albertasawmill andone,
ajoint venture,locatedat Moricetown,British Columbia;
(b) machinestressratedlumberfacilities at its GrandPrairie andPrinceGeorge
sawmills;
(c) a wood-treatingplant in PrinceGeorge;and
(d) apaneland fibre operationin New Westminster,British Columbia.
11. Canforhasno facilities in theProvinceof Quebec.
NoticeofArbitration andStatementofClaim - Canfor Corporation 4
(iii) Canfor Group’s United StatesOperations
12. The Canfor Group’s United Statesoperationsinclude a secondarymanufacturing
operation,approximately9 reloadcentres,and 33 vendor managedinventory facilities
(“VMIs”).
1 3. Thesecondarymanufacturingfacility is locatedin Bellingham,Washington.
14. The nine reload centresare located in Bartow, FL, Dallas, TX, Buffalo, NY.,
Minneapolis,MN, Newnan,GA, Norfolk, VA, Phoenix,AZ, Richmond,VA, andWinston-
Salem,NC. Thesecentresareusedto holdan inventoryof the Canfor Group’ssoftwood
lumberwhichallows theCanforGroupto betterserveits UnitedStatescustomerson a“just
in time” basis.
15. TheCanforGroup’sVMIs arelocatedthroughouttheUnitedStates.Canfortypically
hascapitalof between$50and $80 million (US) in the UnitedStatescommittedto these
facilities.
16. All of theCanforGroup’ssoftwoodlumberdestinedfortheUnitedStatesis purchased
by Canfor Wood Products,which is a British Columbiacompanyand a wholly owned
subsidiaryof CFP.Salesin the UnitedStatesare then madeby CanforWood Products,
including throughagentsin theUnitedStates.
17. In 2000,approximately68%of theCanforGroup’stotal softwoodlumberproduction
was imported into the UnitedStatesby Canfor Wood Products,the importer of record,
which hasbeenliable for bondsand cashdepositsandwhich will be liable for anyduties
ultimatelyassessed,asmorefully setoutbelow. Thesoftwoodlumberwhich is importedinto
theUnitedStatesis re-manufactured,marketedanddistributedthroughtheCanforGroup’s
US-basedreloadcentres,VMI’s andre-manufacturingfacility. Virtually all softwoodlumber
Notice ofArbitration andStatementof Claim - Canfor Corporation 5
importedby CanforWoodProductsinto theUnitedStatesis shippedby rail andtruck. To
facilitatetransportingits productsto andthroughouttheUnitedStatestheCanforGrouphas
leaseda fleet of approximately587railcars.
18. Accordingly,Canforis an investorof a Partyasdefinedin NAFTA Article 1139,and
by virtueof the factssetout above,hasinvestmentsin theterritory of theUnitedStatesas
contemplatedby NAFTA Article 1101 anddefinedin NAFTA Article 1139.
B. Historical Context
19. Canfor brings this claim in connectionwith the Governmentof the United States’
violationsof NAFTA Articles 1102, 1103, 1105and 1110arisingout of andin connection
with conductof the Governmentof the United States,including the DOG and ITC, in
relation to the investigationsof the Canadian softwood lumber industry, and more
particularly, including the investigationscarried out in responseto the Petitionswhich
resultedin the DOC’s Preliminary CountervailingDuty Determination(“PD-CVD”) and
PreliminaryCritical CircumstancesDetermination(“PD-CC”) both issuedby theDOC on
August9, 2001, theDOC’s PreliminaryAnti-Dumping Determination(“PD-ADD”) issued
by the DOC on October30, 2001, theDOC’s Final CountervailingDuty Determination
(“FD-CVD”) andFinal Anti-DumpingDetermination(“FD-ADD”) both issuedby theDOC
onMarch 26, 2002,andtheITC’s May2002FinalDetermination(“ITC-FD”) thattheUnited
Statessoftwoodlumberindustry wasthreatenedwith material injury by reasonof imports
from Canadaof softwoodlumber.
20. Thepresentclaim arisesfrom theunfair, inequitableanddiscriminatorytreatmentof
theCanadiansoftwoodlumberindustry, including Canfor,or moreparticularly Canforand
its subsidiaries,bythe Governmentof theUnitedStates.A reviewof thetreatmentreceived
by theCanadiansoftwoodlumberindustryover thepast20 yearsdemonstratesa patternof
conductdesignedto ensure a predetermined,politically motivated and results-driven
NoticeofArbitration andStatementofClaim - Canfor Corporation 6
outcometo the investigationsresultingin thePD-CVD, PD-CC,PD-ADD, FD-CVD, FD-
ADD andtheITC-FD. Thatcontextincludesthreeprior softwoodlumberinvestigationsby
theDOG (hereafter,Lumber!, LumberII andLumberIII) aswell aslegislativechangesto the
countervailingduty law explicitly designedto ensurethat softwoodlumberfrom Canada
would be foundto besubsidized.An overviewof that conductis describedbelow.
(i) Lumber I
21. On October7, 1982 theUnitedStatesCoalition for Fair CanadianLumberImports
(“Coalition”) filed a countervailingduty petition (“1982 Petition”) with the International
Trade Administration (“ITA”), an arm of the DOG, and the ITC, alleging that certain
softwoodlumberproductsfrom Canadawere subsidizedby the CanadianFederalandlor
Provincial Governmentsand therefore the productsat issuewere countervailableunder
United Stateslaw. In particular,the 1982 Petition allegedthat stumpagechargedby the
Provincial Governmentsconstitutedasubsidyon softwoodlumber.1
22. Following the filing of the 1982 Petition, the ITC and ITA commencedtheir
investigations.In November1982 theITC ruledthat therewasareasonableindicationthat
United Statesdomesticsoftwood lumber producerswere being injured by imports of
Canadiansoftwoodlumberandthat a full investigationwaswarranted.
23. In March 1983theITA issueda PreliminaryDetermination(“1983 PD”) that Canada
wasnot subsidizingits softwoodlumberindustry.
“Stumpage”can be describedgenerallyas a levy or tax paid by timberharvestersfor the right
to cut standingtimberon public lands. Thepaymentof thelevy, aswell asanysubsequentlicenceor tenureagreements,gives the timber harvestersthe right to enteronto Crown (public) land to exploit an in situ
naturalresourceas aprofit aprendre. In addition,aspartof anystumpageprogramstimberharvestersmustalso assumea complexbundle of forest managementobligations,such as road building, fire protection,diseaseprevention,silviculture, andreforestation.A stumpagechargeis a levy on the exerciseof the rightto harvesttimber,andis the economicequivalentof a tax.
NoticeofArbitration andStatementofClaim - Canfor Corporation 7
24. In April 1983 the Coalition filed an appealof the ITA’s 1983 PD with the United
StatesCourtof InternationalTrade(“CIT”). The CIT affirmedthe ITA’s 1983 PD.
25. On May 25, 1983 theITA issueda final negativedetermination(“1983 FD”) finding
that nosubsidyhadbeenconferredby theCanadianFederaland/orProvincialGovernments
onsoftwoodlumberproducersin Canada.TheITA concludedthatstumpageprogramsin the
variousCanadianprovincesdid not conferacountervailabledomesticsubsidybecausethese
programswerenotprovidedto specificenterprisesor industriesasrequiredby UnitedStates
countervailingdutylaw with respectto domesticsubsidies.Further,theITA statedthateven
if stumpageprogramswere specific, theydid not providea countervailablesubsidyin that
theydid not providegoodsat preferentialrates. Finally, the ITA rejectedthe Petitioner’s
requestthat it determinetheexistenceof asubsidyby comparingstumpagepricesin Canada
with stumpageprices in the United States(“cross-borderanalysis”)becausein the ITA’s
opinion any comparisonof stumpageprices acrossborders would be “arbitrary and
capricious”given thevastlydifferent conditionsin thetwo countries.
26. Basedon theITA’s conclusionsin the 1983 FD the 1982 Petitionwasdismissedand
theinvestigationwasterminated.
(ii) Lumber II
27. NotwithstandingtheITA’s ruling in LumberI, on May 16, 1986theCoalitiononce
againfiled a countervailingdutypetition(“1986 Petition”) with theITA andITC alleging
that the samesoftwoodlumberproductsfrom Canadaaswerein issuein LumberI were
subsidizedby the CanadianFederaland/orProvincial governmentsand thereforewere
countervailableunderUnited Stateslaw.
28. On June 26, 1986 the Governmentof Canada,stating that the 1986 Petition
constitutedtradeharassment,requestedconsultationswith theGovernmentof the United
NoticeofArbitration andStatementof Claim - Canfor Corporation 8
Statesunderthe 1979 GATT SubsidiesCode.Following the failure to resolvethe matter
throughconsultations,Canadarequestedtheestablishmentof areviewpanelunderthe 1979
GATI SubsidiesCode.
29. On June27, 1986, the ITC ruled that therewas a reasonableindication that the
United Statessoftwoodlumber industry hadbeeninjured or wasbeing threatenedwith
materialinjury by theimportof Canadiansoftwoodlumberproductsandthereforethe 1986
Petition shouldbe investigatedfurther. The ITC madethis ruling despitethefact that the
United StatesFederalTradeCommission,agovernmentagency,haditself filed a briefwith
theITC confirming thatCanadianstumpageprogramsdid not confersubsidiesanddid not
injure theUnitesStatessoftwoodlumberindustry.2
30. Following the ITC’s preliminarydecisionin July 1986, theITA beganinvestigating
whetherallegedsubsidiesto Canadiansoftwoodlumber producerswere countervailable
underUnitedStateslaw. Meanwhile,negotiationsbetweentheGovernmentsof Canadaand
the UnitedStatescontinuedaslegislation trying to dealwith theissuestalledin theUnited
StatesHouseof Representatives.
31. On October 16, 1986, the ITA issueda PreliminaryDetermination (“1986 PD”),
reversingitself from the 1983 FD, eventhoughthe factshadnot materiallychanged.The
ITC foundthatCanadiansoftwoodlumberproductsweresubsidizedbytheCanadianFederal
and/orProvincialGovernmentsandasa result,imposedaprovisionalduty of 15%on future
importsof Canadiansoftwoodlumberproducts.TheITA foundthattheCanadianstumpage
programswere specific,reversingits finding in the 1983FD. The ITA did not useacross-
borderanalysis,eventhoughthepetitionershadrequestedit to doso. A Final Determination
wasscheduledfor December30, 1986.
2 The FederalTradeCommissionis a governmentagencythatoverseesthe United States
marketplace,seekingto eliminateunfair or deceptivepracticesthat threatenor affectconsumers.Theyundertakeeconomicanalysisandreporttheir resultsto agenciesof the United Statesgovernmentwhenrequested
NoticeofArbitration andStatementofClaim - Canfor Corporation 9
32. On December30, 1986, the Governmentsof the UnitedStatesandCanadasigned
a Memorandumof Understanding(“MOU”) whereintheITA terminatedthecountervailing
dutiesinvestigationin exchangefor theGovernmentof Canadaimposinga 15% exporttax
on Canadiansoftwoodlumberproductsexportedto theUnitedStates. The 1986Petition
and resulting investigationwere effectively terminatedby the signing of theMOU. As a
result, theGovernmentof Canadawithdrew its GATTcomplaint.
(iii) Actions following LumberII
33. The MOU did not declarethat Canadianstumpagepracticesconstituteda subsidy
underUnitedStatesor internationallaw. TheMOU simply providedthat in exchangefor
certain“replacementmeasures”requestedby the Governmentof the United Statesbeing
imposedin CanadianProvinces,theexporttaxleviedonCanadiansoftwoodlumberproducts
wouldgraduallybe reducedto zero. TheGovernmentsalsoagreedthat on 30 daysnotice
eitherparty couldterminatetheMOU.
34. As partof its obligationsundertheMOU, theDOGcreatedaseparateoffice within
theImportAdministration(“IA”) branchto reviewtheGovernmentof Canada’sperformance
undertheMOU. A numberof Canadianprovincesimplementedtherequestedreplacement
measures,including thetwo majorexportingProvinces,QuebecandBritish Columbia,and
as a result, by 1989 the export tax waseliminatedentirely in British Columbiaand was
reducedto a negligibleamountof 3.1% in Quebec.
35. The DOG wassatisfiedwith the MOU andthereplacementmeasuresimplemented
by theCanadianprovinces,including British Columbia. On February22, 1991 the acting
DeputyAssistantSecretaryfor Import Administration,Departmentof Commerce,testified
beforea CongressionalSubCommitteeon Regulation,which was looking into thestatusof
the MOU, that the replacementmeasureshadbeensuccessfulin offsetting any alleged
subsidiesof Canadiansoftwoodlumberproducts.
NoticeofArbitration andStatementof Claim - Canfor Corporation 10
(iv) Lumber III
36. On September3, 1991, the CanadianGovernment,uponbeingsatisfiedthat it had
met all of the conditions under the MOU, including the imposition of the requested
replacementmeasures,exercisedits rightsundertheMOU andnotifiedtheGovernmentof
the UnitedStatesthat it would be terminatingthe MOU effectiveOctober4, 1991.
37. On October4, 1991, the day that the MOU terminated,the Governmentof the
United States,throughtheExecutiveBranch,andfollowing an investigationby theOffice
of theUnitedStatesTradeRepresentative(“USTR”) underSection302 of the UnitedStates
Trade Act of 1974, imposed “interim measures” in the form of immediate bonding
requirementson the importation of softwood lumber from Canada. In conductingits
investigation,theUSTRconcludedthattheterminationof theMOU wasunreasonableand
would have the effect of “burdeningor restricting United Statescommerce,”therefore
“expeditiousaction” wasjustified. Theinterim dutiesfor the affectedCanadianProvinces
wereasfollows: Quebec,6.2%;Ontario,Alberta,ManitobaandSaskatchewan,15%;while
others,including British ColumbiaandtheMaritimes, wereexempt.
38. On October8, 1991, the Governmentof Canadarequestedconsultationswith the
United Statesunderthe 1979 GATESubsidiesCode,to discussthe imposition of interim
dutieswhenno formal investigationhadbeeninitiated. Following thefailure to resolvethe
matterthroughconsultations,theGovernmentof Canadarequestedtheestablishmentof a
review panelunderthe 1979GATESubsidiesCode(“GATT Panel”).
39. On October23, 1991,citing “specialcircumstances”underthe 1979GATESubsidies
Code, the DOG, the samedepartmentwhich on February 22, 1991 had said that the
replacementmeasureshad offset any subsidy, initiated its own countervailing duties
investigation.Thiswas thefirst time in DOGhistorythat a countervailingdutyinvestigation
was initiated without the filing of a formal petition by the domesticindustry. The DOG
NoticeofArbitration and StatementofClaim - Canfor Corporation 11
concludedthat it wasnecessaryto takethisextraordinarystepbecausetheterminationof the
MOU meantthat the United Stateslumber industrywould be deniedanyoffset that had
beenprovidedby Canadianexportchargesagainstwhat in 1986 preliminarily hadbeen
foundto be injurious Canadiansubsidies.
40. On December1, 1991,a disputesettlementpanelwasestablishedunderthe 1979
GATiSubsidiesCodeto heartheGovernmentof Canada’sallegationsregardingtheinterim
bondingmeasures.
41. OnMarch 5, 1992,theDOGissuedaPreliminaryDetermination(“1992 PD”) finding
that Canadianprovincesconferredsubsidieswithin themeaningof UnitedStateslaw, and
consequentlya provisionalduty of 14.48%wasimposedon importsof Canadiansoftwood
lumberproductsincluding softwoodlumberproductsfrom British Columbia.Thesubsidies
found to existconsistedof (a) provincialstumpageprograms,and(b) log exportrestrictions
(“LER”) imposedby British Columbia. Notwithstanding that there were no material
differencesfrom the 1983 FD, other thanthat the replacementmeasureswhich hadbeen
implementedby British Columbiaandothersattherequestof theGovernmentoftheUnited
StatesundertheMOU, the DOG againreversedits 1983 ruling that stumpageprograms
were not specificand did not conferasubsidy.
42. On May 28, 1992 the DOG issueda Final Determination(“1992 FD”) in which it
confirmedthesubsidiesfinding, howeverit loweredthecountervailingduty rateto 6.51%.
DespitetheaffirmativesubsidiesfindingtheDOGonceagainrejectedtheCoalition’srequest
for a cross-borderanalysis,holding that the useof suchan analysisto determinemarket
priceswould be inappropriate.
43. OnJuly 15, 1992, the ITC declaredthat certainCanadiansoftwoodlumberimports
did causematerial injury to UnitedStatesdomesticproducersdespitea lack of evidenceon
therecordsupportinga numberof factorsthat the ITG traditionally relieduponto support
anaffirmative determinationby theDOG (“ITC Ruling”). As a resultof theITG Ruling, the
NoticeofArbitration andStatementof Claim - Canfor Corporation 12
DOG issueda countervailingduty order requiringcashdepositsof 6.51% to be provided
with all future importsof softwoodlumberfrom Canadaexceptthosefrom PrinceEdward
Island, Nova Scotia, New Brunswick andNewfoundland(“Maritimes”), which had been
excludedfrom the investigation.3
44. Following the issuanceof the 1992 FD, and the ITG Ruling, the Governmentof
Canadaandothersrequesteda reviewof thesedecisionsunderChapter19 of the United
States/CanadaFree TradeAgreement(“FTA”). On July 29, 1992 two FTA panelswere
established;one to dealwith theGovernmentof Canada’schallengeto the 1992 FD (“First
FTA Panel)”;andoneto dealwith theGovernmentof Canada’schallengeto theITG’s finding
of injury (“SecondFTA Panel”).
45. On February19, 1993 the GATT Panelissuedits ruling with respectto theinterim
bondingrequirements.ThePanelfoundthattheterminationof theMOU wasnota breach
of anundertakingastheGovernmentof theUnitedStateshadsuggested,andthereforethe
Panelagreedwith the Governmentof Canadathat the Governmentof the UnitedStates
actionsof imposinginterim bondingrequirementsprior to a preliminarydeterminationof a
subsidywerecontraryto theGovernmentof theUnitedStates’obligationsunderthe 1979
GATESubsidiesCode. ThePaneltook theunusualstepof recommendingthat theUnited
Statesrefund anycashdepositsthat hadbeencollected.
46. On May 6, 1993,theFirst FTA Panelrenderedits decisionfinding unanimouslythat
theDOG failed to actin accordancewith UnitedStateslaw. TheFirst FTA Panelfound:
• that therewas insufficient evidenceon the record to justify the DOG’s
findings;
~Although referredto as the “Maritimes” in the variousPDsandFDs, thesefour CanadianProvinces(New Brunswick, Nova Scotia,PrinceEdwardIslandand Newfoundland)are morecommonlyknown as to “Atlantic Provinces”. In the Canadianlexicon, the term “Maritimes” includesonly New
Brunswick, Nova ScotiaandPrinceEdwardIsland,anddoesnot include Newfoundland.
NoticeofArbitration amidStatementof Claim - Canfor Corporation 13
• that theDOG hadmisunderstoodthetheoreticalanalysisbeingput forward
by theCanadians;
• that theDOG ignoredcrucial empirical evidence1
• that the DOG failed to properly analyzeall four requiredfactors when it
conductedthespecificityanalysisof thesubsidiesat issue;and
• thattheDOG failedto properlyconductananalysisof whethercertainof the
allegedsubsidieshadany market distorting effect. On this issuethe Panel
notedthat thevery economicmodel that the DOG usedin the casedefined
asubsidyassomethingthat“distortedthemarketprocess”thereforethemarket
effect “could not be legally ignored.” The Panel also pointed out an
inconsistencyin theDOG’s reasoningin that theDOG hadusedthemarket
distortion test to determinethat the British ColumbiaLERs amountedto a
subsidythatwascountervailableyet it refusedto applysuchatestto determine
whethera subsidyexistedin relationto othergovernmentprograms.
47. As a result, the First FTA Panel remandedthe decisionback to the DOG, with
instructionsto re-examinetheirdeterminationin light of thefirst FTA Panel’scommentsand
findings.
48. OnJuly26, 1993 theSecondFTA PanelissuedaunanimousdecisionfindingtheITG’s
determinationto be flawed under both internationaland United Stateslegal standards
becausetherewas insufficient evidenceto supportthe conclusionsthe ITC reached.In
addition,theSecondFTA Panelfoundthat theITG’s relianceon cross-sectoralcomparisons
wasflawedbecauseit comparedan investigatedindustryto a non-investigatedindustry.The
Panelremandedthat determinationbackto theITC for furtherconsiderationin light of the
Panel’scommentsandfindings.
NoticeofArbitration andStatementofClaim - Canfor Corporation 14
49. On September17, 1993,largely ignoringbut strongly criticizing thefindingsof the
First FTA Panel,theDOG issuedareviseddetermination,finding onceagainthat Canadian
softwoodlumberproductsweresubsidized.AlthoughtheDOGacknowledgedthatamarket
distortion analysiswasa possibletool in measuringcountervailablesubsidies,it saidthat it
hadusedits discretionandchosenotto look at themarketeffectsof theallegedsubsidiesas
theFirst FTA Panelhadrequested.As aresult,theDOGconfirmedits earliersubsidyfinding
andincreasedthe CVD dutiesfrom 6.51% to 11.54%.
50. FollowingtheDOG’sdeterminationon remand,theGovernmentof Canadaexercised
its rightsundertheFTA to havetherevisedDOGdeterminationreviewedagainby theFirst
FTA Panel.
51. On October25, 1993,theITC issuedits reviseddeterminationwithout significantly
adjustingits interpretationof the evidence. Again it determinedthat Canadiansoftwood
lumberhadcausedmaterial injury to theUnitedStatessoftwoodlumberindustry.
52. At theendof October1993 theCanadianGovernmentexercisedits rightsunderthe
FTA to havetherevisedITC determinationreviewedagainby the SecondFTA Panel.
53. On December17, 1993,after reviewingthe DOG’s reviseddetermination,theFirst
FTA Panel issued anotherremandorder requiring the DOG to once again review its
determinationin light of theFirst FTA Panel’sfindings andcomments.TheFirst FTA Panel
orderedtheDOGto enteranegativedeterminationbecausetherewasnotsufficientevidence
on therecordto supportthe finding of countervailablesubsidies.
54. On January6, 1994 the DOG finally acceptedthe First FTA Panel’s ruling that a
negativefinding was in order.The DOG”s acceptancewasacknowledgedby theFirst FTA
Panelon February23, 1994 andon March7, 1994aNoticeof Final PanelAction wasissued,
publishedandmadeofficial on March 17, 1994, therebyconcludingthereviewof the 1993
FD.
NoticeofArbitration andStatementofClaim - Canfor Corporation 15
55. OnJanuaiy28, 1994theSecondFTA PanelfoundthattheITC determinationwasstill
not substantiatedby the evidenceon therecordand issuedasecondremandfor the ITC to
review its reviseddetermination.The SecondFTA Panel found that the ITG’s revised
decision was not completedin accordancewith United Stateslaw and that the price
comparisonsthat the ITC usedwerebasedon datathat theITC itself hadinitially rejected
in its original injury determination.
56. On March 14, 1994, the ITC issueda secondreviseddecisionlargely ignoringthe
SecondFTA Panel’srevisedfindings. Thisdecisionwassubsequentlyreviewedonceagain
by theSecondFTA Panel.OnJuly 6, 1994theSecondFTA Panelagainfoundthat theITC’s
decisionwasnotsupportedby theevidenceon therecordandremandedit to theITC for the
third time. The ITC did not issueanotherdecisionbecausetheappealwas renderedmoot
by thesubsequentrevocationof thecountervailingduty orderdescribedbelow.
57. On April 6, 1994,basedon pressurefrom the Coalition, the Governmentof the
UnitedStatesrequestedthatanExtraordinaryChallengeCommitteebeappointedunderthe
FTA to reviewthedecisionof theFirst FTA Panel. It allegedthat (a) thePanelhadexceeded
its jurisdiction by failing to apply the properstandardof review, and (b) that two of the
Canadianmembersof the Panelhadfailed to discloseconflictsof interest. Therequestfor
an Extraordinary Challenge Committee was done without consultations with the
Governmentof Canada,asrequiredundertheFTA. TheCoalition,andtheGovernmentof
the United States,alleged that two Canadianmembersof the First FTA Panel had
relationshipswith forestcompaniesand/ortheGovernmentof Canadawhich affectedtheir
ability to providea fair and objectivedecision. No objectionshad beenraisedby the
CoalitionortheGovernmentof theUnitedStatesat thestartof the proceedingsbeforethe
First FTA Paneleven though the allegationsraisedbefore the ExtraordinaryChallenge
Committeewerebasedon factsthatwereknownoroughtto havebeenknownto all parties
at thestartof theFirst FTA Panelproceedings.
NoticeofArbitration andStatementofClaim - Canfor Corporation 16
58. On August3, 1994 theExtraordinaryChallengeCommitteeconfirmedtheFirst ETA
Panel’sdecisionsanddismissedthe United StatesGovernment’sallegationsof conflict of
interest.A majority of theCommitteewere of the opinion that the First FTA Panelacted
within themandateof theFTA andthatthe allegationsof conflict of interestwere without
merit. UndertheFTA this decisionwasnot subjectto appeal.
59. On August16, 1994,theDOGpublishedaformal noticerevokingthecountervailing
dutyorderandterminatingthecollectionof anyadditionaldutieson softwoodlumberfrom
Canada.Although the 1992countervailingdutyinvestigationended,relying onyet another
controversiallegal interpretationwhich underminedspecific FTA languageto thecontrary,
theDOGstatedthat theGovernmentof theUnitedStatesdid not haveto returnanyduties
paid prior to the First ETA Panel decision of March 17, 1994, which meant that the
Governmentof the United Stateswould keepthe hundredsof millions of dollars in cash
depositswhich hadbeencollectedfrom Canadiansoftwoodlumberexportsfrom October
1991.
(v) Actions following Lumber III
60. Havingfailedin theirobjectiveof puttingin placecountervailingduties,theCoalition
continuedpressuringUnitedStatespoliticiansto changethe tradelaws to eitherimposea
duty on Canadiansoftwoodlumberorchangethe UnitedStateslaw to legislativelyreverse
LumberIII.
61. Forexample,on September14, 1994 the Coalition filed proceedingsin theUnited
StatesCourtof Appealsfor theDistrict of Columbiachallengingtheconstitutionalityof the
FTA Paneldecisionsandthe FTA chapter19 disputeresolutionprocess.
62. TheCoalition’s lobbyingfinally succeededin changingUnited Statessubsidieslaw
to increaseits ability to harmtheCoalition’s Canadiancompetitorsin Decemberof 1994.
As partof thepassageof theUruguayRoundAgreementsAct(“URAA”), legislationdesigned
Notice ofArbitration andStatementof Claim - Canfor Corporation 17
to bring theUnitedStatesintocompliancewith the World TradeOrganizationAgreement
on SubsidiesandCountervailingMeasures(“SCM Agreement”),changeswere madeto the
UnitedStatescountervailingduty lawsthat would: (a) allow theDOG to ignoretheeffects
of anyallegedsubsidy;and(b) to find asubsidyprogram“specific” basedon only oneof the
fourrelevantfactors.As outlinedin theStatementof AdministrativeAction thataccompanied
the bill that becamethe URAA, thesechangeswere specifically intendedto effectively
overrulethe First ETA Panel’sfinding in LumberIII.
63. On December15, 1994,after thesigninginto law of the URAA, the UnitedStates
Governmentannouncedthat it would reimburseCanadiancompaniesfor all cashdeposits
thathadbeencollectedandimproperlyheldaspartofthe 1991 through1994countervailing
duty investigation. In addition, also on December15, 1994, the Coalition Petition
challengingtheconstitutionalityof the ETA Paneldecisionswasabandoned.
64. NegotiationscontinuedbetweentheGovernmentsof theUnitedStatesandCanada
through 1995 and into 1996 against the threat that the Coalition would file a new
countervailingduty petitionunderthemorerelaxedstandardscreatedby the URAA. On
April 2, 1996 the Governmentsof Canadaand the United Statessignedthe Softwood
LumberAgreement(“SLA”) which providedthat for a periodof five (5) years, a specific
volumeof softwoodlumbercouldentertheUnitedStatesduty free;thereafteranexporttax
would be imposedon aslidingscale.In addition,thecountriesagreedthat no tradeactions
would be initiated with respectto softwood lumberduring the period of the agreement
(which expiredon April 1, 2001).
(vi) Byrd Amendment
65. On October 28, 2000, the United Statesenactedthe ContinuedDumping and
SubsidyO[fsetAct of2000 (“Byrd Amendment”),anamendmentto Title VII ofthe TariffAct
of 1930. TheByrd Amendmentprovidesthat dutiesassessedpursuantto countervailingduty
Notice ofArbitration andStatementofClaim - Canfor Corporation 18
or anti-dumpingordersshall be distributedannuallyto affecteddomesticproducers. An
“affecteddomesticproducer”is a producerwho eitherfiled or supportedthecountervailor
anti-dumpingpetition. The Byrd Amendmentwas the last of a seriesof attemptsby the
United StatesCongressto enactessentiallyidentical legislation, specifically directedat
assistingUnited Statesindustry, and was passedas a part of the unrelatedAgricultural
AppropriationsAct,2001.
(vii) ImmediateContext - Lumber IV
(a) Allegationsin the Petitions
66. On April 2, 2001,one day afterthe SLA expired,two petitionswere filed with the
DOG andITG by theCoalitionandothers(collectively, the“Petitioners”)allegingthat the
UnitedStatessoftwoodlumberindustrywasmateriallyinjuredor threatenedwith material
injurythroughimportsof subsidizedanddumpedsoftwoodlumberfrom Canada,andseeking
the imposition of countervailingduties and anti-dumpingduties. The Petitions also
containedallegationsof “critical circumstances”.
(b) ITC andDOC PreliminaryDeterminations
67. On May 23, 2001, the ITC preliminarily determinedthat therewasa “reasonable
indication” that the United Statessoftwood lumber industry wasbeing threatenedwith
material injury by reasonof import of Canadiansoftwoodlumber.
68. On August 9, 2001, the DOG “preliminarily” determinedthat countervailable
subsidieswerebeingprovidedto producersandexportersof softwoodlumberproductsfrom
Canada,including British Columbia,andthat critical circumstancesexisted.
69. On November6, 2001, theDOG publishedthe PD-ADD, calculatinga weighted-
averagedumpingmarginof 12.98percentfor Ganfor.
NoticeofArbitration and StatementofClaim - Canfor Corporation 19
70. Nojudicial reviewor redressis availableunderUnitedStateslaw in respectof these
PreliminaryDeterminations.
(c) ITC and DOC Final Determinations
71. On March 26, 2002, the DOG issuedthe FD-CVD, which adoptedan “Issuesand
DecisionMemorandum”datedMarch 21,2002,settingout thereasonsfor theFD-CVD.
72. On March26,2002,theDOG issuedits ED-ADD, significantly modifying its earlier
determinationwith respectto Ganfor, but nonethelesscalculatinga weightedaverage
dumpingmarginof 5.96% for Ganfor.
73. On May 16, 2002, the ITC issuedits final determinationthat the United States
softwoodlumber industry was threatenedwith material injury by reasonof imports from
Canadaof softwoodlumber. This final determinationwasmadeofficial on May 22, 2002,
following publication in theFederalRegister.
(d) DOC’s Analysis - PD-CVD
74. The countervailingduty petition allegedthat provincial stumpageand log export
restraints,aswell ascertainotherfederalandprovincialprograms,constitutedcountervailable
subsidies.
75. UnderUnitedStatescountervailingduty law, theUnitedStatesis entitledto impose
countervailingdutiesin certaincircumstanceswherea countervailablesubsidyexists. For a
countervailablesubsidyto exist, theremustbe (1) a “financial contribution”that (2) confers
a “benefit”. If the programat issue is a domesticsubsidy,the programmust also be (3)
“specific” to an enterpriseor industryor group thereof. The relevantprogramsallegedto
amounttocountervailablesubsidiesincludedthevariousprovincialstumpageprograms.The
DOGdid notmakea separatefindingwith respectto log exportrestraintsbutstatedthatany
Notice ofArbitration andStatementof Claim - Canfor Corporation 20
benefitprovidedthroughlog export restraintswould be includedin thecalculationof the
stumpagebenefit.
76. Theentireanalysisof theDOG asto whetherthestumpageprogramsconstituteda
“financial contribution”andwerethereforecountervailablesubsidies,wasasfollows:
In addition to beingspecific,acountervailablesubsidyprogram
mustprovidea financialcontribution. Section771(5)(D)(iii) of
theAct statesthattheprovisionof agoodorservice(otherthan
generalinfrastructure)by a governmentconstitutesa financial
contributionunderthestatute.We preliminarilydeterminethat
the provision of stumpageby the provincial governments
constitutesthe provision of a good or serviceunder section
771(5)(D)(iii) oftheAct. Thus,wepreliminarily determinethat
the provincial governments have provided a financial
contributionasdefinedundersection771(5)(D)(iii) of the Act
to Canadiansoftwoodlumberproducers.
77. As notedabove,if the programat issue is a domesticsubsidy,in order for it to be
consideredcountervailable,theprogrammustalso be specific to an enterprise,industryor
group. Section771(5A)(D)(iii) of the Tariff Act of 1930provides:
Where there are reasonsto believe that a subsidy may be
specificasa matterof fact, thesubsidyis specificif oneor more
of the following factorsexists:
(I) The actual recipients of the subsidy, whether
consideredon anenterpriseor industry basis,are
limited in number.
(II) An enterpriseor industryis a predominantuserof
thesubsidy.
NoticeofArbitrationandStatementofClaim - Canfor Corporation 21
(III) An enterprise or industry receives a
disproportionatelylargeamountof thesubsidy.
(IV) Themannerin which theauthorityprovidingthe
subsidyhasexerciseddiscretionin thedecisionto
grant the subsidyindicatesthat an enterpriseor
industryis favoredoverothers.
78. The DOG is required to undertakethis analysissequentially. The applicable
Regulation19 G.F.R. Section351.502(a)providesthat if a singlefactorwarrantsafindingof
specificity the DOG will not undertakefurther analysis. In the PD-GVD, the DOG
determined,under (I) above,that becauseonly two industriesbenefittedfrom stumpage
programs,thoseprogramsmet therequirementsof specificity. Again, this finding reversed
the 1983conclusionof theDOG in Lumber!that stumpageprogramswerenotprovidedto
specificindustriesorenterprises.
79. Oncethe allegedsubsidywas foundto be“specific” andthat it provideda“financial
contribution”,theDOG wasrequiredto determinewhethertheallegedsubsidyprovideda
“benefit”. Undersection771(5)(E)(iv)of theTariffActof 1930,abenefit is conferredwhen
the governmentprovidesa good or servicefor less thanadequateremuneration. Section
771(5)(E)provides,in relevantpart, thattheadequacyof remuneration:
shallbe determinedin relationto prevailingmarketconditions
for thegoodor servicebeingprovided..,in the country which is
subject to the investigation or review. Prevailing market
conditions include price, quality, availability, marketability,
transportation,andotherconditionsof...sale.(emphasisadded)
80. Similarly, Article 14(d) of theSCMAgreementdirectsthat in determiningwhether
anallegedsubsidyrelatedto the provisionof a goodby a governmentconfersa benefit:
Notice ofArbitration andStatementof Claim - Canfor Corporation 22
Theadequacyof remunerationshall be determinedin relation
to prevailing market conditions for the good or service in
questionin the country of provision or purchase (including
price, quality, availability, marketability, transportation,and
otherconditionsof purchaseor sale. (emphasisadded)
81. Section351.511(a)(2) of theDOG’sRegulationssetsout ahierarchicalmethodology
of benchmarksthattheDOG usesto establishwhetheragoodorservicehasbeenprovided
at less thanadequateremuneration.In orderof preferencetheseare:
(a) Market determinedprices from actualtransactionsin the country in
question;
(b) A worldmarketpricewhereit is reasonableto concludethat suchprice
would be availableto purchasersin thecountryin question;and
(c) Whetherthegovernmentprice is consistentwith marketprinciples.
82. Despite the above internationalstandards,the DOG’s statutory and regulatory
mandate,andthefact that informationon actualmarketdeterminedstumpagetransactions
wasavailableagainstwhich to assessthe governmentstumpageprices(astheyhaddonein
LumberIll) which informationshowednobenefitwasconferred,theDOGdeclinedto apply
thefirst benchmark. Instead,theDOG decidedto apply thesecondbenchmarkandusea
“cross-borderanalysis,”notwithstandingthe DOG hadrefusedto conducta cross-border
analysisin all threeprevioussoftwoodlumberinvestigationsandhadheldthat to engagein
sucha cross-borderanalysiswould be “arbitrary andcapricious”,andinappropriate.
83. TheDOG justified this decisionby holding that “stumpagepricesfrom the United
Statesqualify as commerciallyavailableworld marketprices becauseit is reasonableto
concludethat UnitedStatesstumpagewould beavailableto softwoodlumberproducersin
Canadaatthe samepricesavailableto U.S. lumberproducers.” It madethis finding despite
NoticeofArbitration amidStatementof Claim,, - Caimfor Corporation 23
the fact that by definition, UnitedStatesstumpagerightsarenot available“in” Ganada(the
countrywhich is subjectto investigation)andthefact thatsomeof theStatesin theUnited
States whose stumpage prices it used as benchmarksprohibit the export of logs.
Accordingly, theDOG determinedthat thebestinformationuponwhich to determinethat
Ganadianstumpagehadbeenprovidedat lessthanadequateremunerationwasto compare
stumpageprices chargedby Canadiangovernmentsto “market-determinedprices for
stumpageavailablein theUnitedStates.”
84. The decisionto usea cross-bordercomparisonwas madeeven thoughtherewas
evidencethatwasavailableon therecordwhich would haveeasilyallowedtheDOGto use
thethird benchmark“Measurementof Pricesto GeneralMarketPrinciples”. However,using
the third benchmark,therewould havebeen no benefit conferredon softwoodlumber
producers. In otherwords, theonly way in which theDOG coulddeterminethat a benefit
had beenconferredwas to usea “cross-border”analysis,which it hadrejectedon three
previousoccasionsandhaddeterminedwas “arbitrary and capricious”,andinappropriate.
(e) DOG’s Analysis - Canfor’s requestfor a companyspecific
subsidyrate
85. By letterdatedMay 30, 2001, Ganformadeatimely requestthat theDOG calculate
a companyspecificcountervailablesubsidyratefor Ganfor. At no time prior to theissuance
of the PD-GVD did the DOG respondto Ganfor’s requestthat it calculatea company
specificsubsidyratefor Ganfor, nordid it adviseGanforthat it would not do so. It simply
ignoredGanfor’srequest,andno companyspecificquestionnairewasprovidedto Ganfor.
86. The DOG later justified its refusal to calculatea companyspecific countervailable
subsidyratefor Ganforon thebasisthatGanforhadfailed to submita voluntaryresponseto
thequestionnaireissuedto theGovernmentof Ganada.However,theDOG did not advise
Canfor it could or that it shouldrespondto the Governmentof Canada’squestionnaire.
NoticeofArbitration andStatementofClaim - Canfor Corporation 24
(f) DOG’s Analysis - PD-CC
87. If “critical circumstances”arepreliminarily determinedto be present,underUnited
Statescountervailingandanti-dumpingdutylaw,suspensionof liquidationandbondsorcash
depositsmayberequiredretroactively,for imports thathaveoccurredup to 90 daysbefore
the PreliminaryDetermination.
88. With respectto the“critical circumstances”allegation,theDOGwasrequiredto find
that arelevantandapplicableexportsubsidyactuallyexistedbeforeacritical circumstances
finding couldbemade,andfurther, that thereweremassiveimportsovera relatively short
periodof time (Section703(e)(I)of the UnitedStatesTariflAct of 1930).
89. In relationto the first partof this test, theDOG determinedthat asubsidyprogram
employed by the Province of Quebec for its producers (“Export Assistance from
InvestissementQuebec”)wasan exportsubsidy.It stated:
.the Departmenthas preliminarily determinedthat Export
Assistancefrom InvestissementQuebec is a countervailable
exportsubsidy. Thereis no questionthat export subsidiesare
inconsistentwith the Agreement.Therefore,this prongof the
testis satisfied.
90. Thedifficultieswith this findingwerethattheprogramwasnot tiedsolelyto exports;
further, evenif this programconferreda benefit at all, the allegedexport subsidyat best
benefittedonly .0029%of all softwoodlumberexportsto theUnitedStates,andthenonly
thoseexports from the Provinceof Quebec;and, theDOG’s own caselaw doesnot allow
applicationof critical circumstancesfindingswherethesubsidyis lessthanademinimuslevel
of onepercent. However,in the DOG’sview, it wassomehowimmaterialthat thebenefit
NoticeofArbitration andStatementofClaim - Canfor Corporation 25
providedby theallegedexportsubsidywasbelow the deminimusthresholdeventhougha
finding of critical circumstanceswould result in theretroactiveapplicationof duties.
91. Having foundan exportsubsidyexistedin the Provinceof Quebec,theDOGthen
determinedthattherewere“massiveimports” overa“relativelyshort period”,afterapplying
a dubious seasonaladjustmentfactor and after arbitrarily excluding all exports from the
provincesof New Brunswick,NovaScotia,NewfoundlandandPrinceEdwardIsland. Once
again, if it had not excluded theseprovinces,a finding of massiveimports could not
reasonablyhavebeensupported.
(g) DOG’s Analysis - FD-CC and FD-CVD
92. DespiteCanfor’srequestof May30, 2001,theDOGdid notmakeacompanyspecific
determinationof thesubsidyratefor Ganfor. Rather,however,thanseekingsolelyto rely
upon the clearly arbitrary basis articulatedin the PD-GVD, which would have required
Canforto submitavoluntaryresponseto a questionnairethat did not exist, theDOGnow
determinedthat additionally,despiteclearUnitedStateslaw to the contrary,therewasno
statutory basis for a considerationof voluntary respondentsin casesconductedon an
aggregatebasisundersection777A(e)(2)(b)of the Tariff Act.
93. TheDOG alsoconfirmedits useof a cross-borderanalysisin theFD-GVD.
94. Unlike in thePD-CC,theDOG did notfind thatcritical circumstancesexistedin the
FD-GG. In particular,it found,contraryto its earlierfinding, that “Export Assistancefrom
lnvestissementQuebec”did not confera benefitand thereforewas not a countervailable
subsidy. Accordingly, a final determinationof critical circumstanceswasprecluded. The
DOG did not addressanyfurtherits original decisionmakingprocessthat led to theearlier
finding of benefit.
Notice ofArbitration and Statementof Claim - Canfor Corporation 26
(h) DOG’s Analysis - ED-ADD
95. While theED-ADD reducedthemarginof dumpingfrom 12.98%to 5.96%,theDOG
continuedto useanunfaircomparisonasbetweenproductsallegedlybeingdumpedandthe
productsallegedlyinjuredor threatenedwith injury.
IV. VIOLATIONS OF THE NAFTA
A. Overview of RelevantProvisionsof NAFTA
96. UnderNAFTA Chapter11, theGovernmentof theUnitedStates,includingits state
organsthe DOG and ITG, oweobligations,enforceableat the instanceof an investorof
anotherNAFTA Party. Canfor claims that the RespondenthasviolatedNAFTA Articles
1102, 1103, 1105 and 1110, in thecircumstancessetout in this Statementof Claim. The
relevantprovisionsof the NAFTA aresetout in an appendixto this Statementof Claim.
(i) NAFTA Article 1102
97. UnderNAFTA Article 1102, the Governmentof the United Statesis requiredto
accordto Canadianinvestorsand their investmentstreatmentno less favourablethan the
treatmentit accordsto competinginvestorsand investmentsbasedin the UnitedStates.
NAFTA Article 1102accordinglyprohibitsdiscriminationevidencedin measuresthateither
favoura NAFTA Party’sown nationalsorthatdisadvantagetheinterestsof theircompetitors
from otherNAFTA Parties.
98. NAFTA Article 1102 requiresthe Respondentto providethebestlevel of treatment
to Ganforandits investmentsthat it is providingto theGanforGroup’sUnitedStatesbased
competitors,operatingin thesameindustryandunderthesamecircumstances.
99. As describedin moredetailbelow, a betterlevel of treatmentbeingprovidedto the
UnitedStatesbasedcompetitorsof theGanforGroup is that which doesnot requirethem
to payprohibitive dutiesimposedin the mannerandcircumstancesallegedhereinon their
Notice ofArbitration andStatementofClaim - Canfor Corporation 27
sourcingof softwoodlumberfor re-manufacturing,salesanddistributionin theUnitedStates.
The best level of treatmentbeing providedto the Ganfor Group’s United Statesbased
competitorsis thatwhich is beingreceivedby thePetitioners,who not only benefitfrom the
unfair,arbitraryandillegal impositionofcountervailingandanti-dumpingdutiesagainsttheir
Canadianbasedcompetitors,but arealso entitledto receiveundertheByrd Amendmenta
portion of the total dutiescollectedfrom their Canadianbasedcompetitors,including the
CanforGroup.
(ii) NAFTA Article 1103
100. Under NAFTA Article 1103, the Respondentis requiredto accordto Canadian
investorsandtheir investmentstreatmentno less favourablethanthat which is availableto
anyother foreign investoror its investmentundera similar treaty. Accordingly, NAFTA
Article 1103 entitles Canfor and its investmentsto receivethe best level of treatment
availableto anyforeigninvestorsor investmentsin theUnitedStatesunderanycomparable
internationalinvestmentagreementobligation,includingthosefoundin bilateralinvestment
treaties.
101. On January11, 1995, the United Statesenteredinto a bilateral investmenttreaty
(“BIT”) with Albania. Underthis investmenttreaty,which was implementedsubsequentto
thecoming into force of theNAFTA, theGovernmentof the UnitedStateshasagreedto
provide theinvestmentsof Albanianinvestorswith the following level of treatment:
3. (a) Each Party shall at all times accord to covered
investments fair and equitable treatment and full
protection and security, and shall in no caseaccord
treatment less favourable than that required by
internationallaw.
(b) NeitherParty shall in any way impair by unreasonable
anddiscriminatorymeasuresthemanagement,conduct,
NoticeofArbitration andStatementof Claim - CanforCorporation 28
operation, and sale or other disposition of covered
investments.
102. On April 19, 1994 the United Statessigneda bilateral investmenttreaty (“BIT”)
which enteredinto forceon February16, 1997,with Estonia. Underthis investmenttreaty,
which was implementedsubsequentto the coming into force of the NAFTA, the
Governmentof theUnitedStateshasagreedto providetheinvestmentsofEstonianinvestors
with the following level of treatment:
ARTICLEII
TREATMENT OF INVESTMENT
3. (a) Investment shall at all times be accordedfair and
equitable treatment, shall enjoy full protection and
securityandshall in no casebeaccordedtreatmentless
thanthat requiredby internationallaw.
(b) Neither Party shall in any way impair by arbitraryor
discriminatory measuresthe management,operation,
maintenance,use,enjoyment,acquisition,expansion,or
disposal of investments. For purposes of dispute
resolutionunderArticles VI andVII, a measuremaybe
arbitraryordiscriminatorynotwithstandingthefact that
a Party has had or has exercisedthe opportunity to
review such measurein the courts or administrative
tribunalsof a Party.
(c) Each Party shall observeany obligation it may have
enteredinto with regardto investments.
NoticeofArbitration andStatementof Claim - Canfor Corporation 29
103. If it is determinedthat the level of treatmentthat the Respondentmust provide to
Ganforandits investmentsunderNAFTA Article 1105 is lessthanthat providedunderthe
UnitedStates- Albania BIT or theUnitedStates- EstoniaBIT or anyotherBIT enteredinto
by theGovernmentof the UnitedStatessubsequentto theentryof the NAFTA, Ganforis
nonethelessentitledto receivethebetterlevel of treatmentprovidedundersuchtreatiesby
virtueof theapplicationof NAFTA Article 1103,andclaims its entitlementto thatstandard
of treatmentin this proceeding.
(iii) NAFTA Article 1105
104. UnderNAFTA Article 1105,theRespondentis requiredto accordto investmentsof
Canadianinvestors“treatment in accordancewith international law, including fair and
equitabletreatmentandfull protectionandsecurity”. Theinvestmentsof theinvestorshould
accordinglybe treatedin accordancewith “internationallaw”, which includesnot only the
standardof “fair andequitabletreatment”but also compliancewith the internationallaw
principle of good faith, the customaryinternationallaw prohibition againstarbitrary and
discriminatorytreatment,andanyrelevanttreatystandardsto which the Governmentof the
UnitedStateshasagreedto bebound.
105. UnderNAFTAArticle 1105 theRespondentmustrefrainfrom actingin amannerthat
would resultin a denialof substantiveor proceduraljustice to Canforandits investments.
This standardof treatmentprotectsthe investorandits investmentsfrom wrong, unfair or
unjust adjudicativeor administrativedecisionmakingaswell asfrom denialsof procedural
justice, including decisionsreachedin a procedurallyunfair manner,decisionsreached
without sufficientopportunityto revieworrespondto evidenceuponwhich theyarebased,
decisionsmadewithout full noticeof all relevantmatters,anddecisionsmadewithout a full
opportunityto beheard,without impartial considerationandwithouta reasonedjudgment,
all of which mustbeadministeredthrougha transparentsystem.
NoticeofArbitration and Statementof Claim - Canfor Corporation 30
(iv) NAFTA Article 1110
106. UnderNAFTA Article 1110, the Respondentis obligatedto provide full, fair and
effectivecompensationto investorsin theeventof an expropriationof their investmentin
theUnitedStatesandto compensatean investorwhenevergovernmentactionsubstantially
interfereswith theuseor enjoymentof its investment,whetheror not the Respondentor a
UnitedStatesbasedcompetitorreceivesa directbenefit from sucha taking.
B. VIOLATIONS OF NAFTA BY THE RESPONDENT
(i) Overview
107. As detailedabove,the Governmentof the United Stateshas,for over 20 years,
engagedin anongoingcourseof conduct,with theobject,or alternatively,effect,of causing
seriousharm to the Canadiansoftwood lumber industry, including companiesthat are
investorswith investmentsin theUnitedStatesunderNAFTA Chapter11,suchasGanfor.
108. Despiterepeatedconfirmation by domesticand internationaltribunals that the
Respondent’sactionshaveviolatedinternationalandUnitedStateslaw, theRespondenthas
perseveredby attempting to effect changes, modifications or otherwise improper
interpretationsof its law in order to causesignificant economicharm to those in the
competitivepositionof theGanforGroupandcompanieslike it in theUnitedStatesmarket.
ThePD-GVD, PD-CC,PD-ADD,FD-GVD,andED-ADD,aswell astheITG-EDareamong
thelatestof thoseongoingactionsdirectedat andcausingharmto Ganforandthose in its
position.
109. Theactionsof theRespondent,particularlyasevidencedby theconductof theDOG
and ITG as describedhereinand aswill be more fully elaboratedat the hearingof this
proceeding,whetherconsideredindividuallyor collectively,oraspartof acampaignagainst
the Canadiansoftwoodlumberindustry,all aresuchasto fall below the standardrequired
NoticeofArbitrationandStatementofClaimn - Canfor Corporation 31
of a stateunderNAFTA Articles 1102, 1103 and 1105. Furthermore,theultimateeffectof
theRespondent’simproperconductoutlinedhereinhasbeenanexpropriationoftheUnited
Statesbusinessoperationsof Ganfor.
(ii) Violations of NAFTA — PD-CVD
(a) Overview
110. The actionsof the DOG in arriving at the PD-GVD violate eachof Articles 1102,
1103and1105. Moreparticularly,themannerin whichtheDOGdeterminedthatCanadian
stumpagepracticesarecountervailablesubsidieswasarbitrary andunreasonable,andled to
a discriminatoryandthereforeunfair andinequitableresult.
111. In sum, theDOG’sconductfell belowthestandardrequiredof theRespondentunder
NAFTA Articles 1102, 1103 and 1105by:
(1) actinginconsistentlywith the Governmentof theUnitedStates’international
obligations;
(2) misapplyingtheapplicablelegal standards;
(3) failing to haveregardto the DOG’s own pastpractice1
(4) makingartificial andintentionallyskewedcomparisonswhich couldonly be
designedto achievea particularresult;
(5) making its determinationwithout any, or anysufficient, considerationof the
argumentsandevidenceon the recordbefore it; and
(6) makingnumerouserrorsin thecalculationsit did make.
TheDOG, in reachingthePD-GVD, eitherintendedto arriveat a particulardiscriminatory
result, which could only be reachedby committing the breachesof internationaland
domesticlaw outlinedmorefully below,or wasreckless,arbitraryandcapriciousin arriving
at that result.
Notice ofArbitration and Statementof Claim - Canfor Corporation 32
(i) DOG Determination that provincial stumpage
programsprovidea financial contribution
109. As outlinedabove,theDOGcouldonly imposecountervailingdutiesif theprovincial
stumpageprogramsconstitutedasubsidy.To constituteacountervailablesubsidy,theDOG
recognizedthat thegovernmentstumpageprogramwould needto bea “good or service”
which resultsin a “financial contribution”. Had it proceededon the basis of a reasoned
analysis,it couldnothavemadeanaffirmativedeterminationonboth points,andwasbound
to dismissthe Petition.
110. However,in dealingwith this fundamentalmatter,theDOG simply statedthat
“The provision of stumpageby the provincial government
constitutesa good or service and...thus, ... the provincial
governmentshaveprovideda financialcontribution...”
111. TheDOG’s determinationandprocessof determinationin this regardfell belowthe
standardrequiredof the United StatesunderArticles 1102, 1103, and 1105 in that it was
arbitraryandunreasonable,andled to adiscriminatoryandthereforeunfairandinequitable
result,by:
(1) failing to provideanyreasonableanalysisin comingto its determinationthat
provincial stumpageprogramsare a “financial contribution”, eventhough it
kneworoughtto haveknownthatsuchadeterminationwouldbe inconsistent
with the Respondent’sdomestic law and its obligations under the SCM
Agreement;
(2) failing to determinewhich of a “good” or a “service” a provincial stumpage
programis1
(3) failing to provideany reasonsor otherbasisfor its conclusions,including the
determinationthatprovincialstumpageprogramsarea “financial contribution”;
and
NoticeofArbitration andStatementof Claim - Canfor Corporation 33
(4) ignoringrelevantevidencesubmittedby the Governmentof Canadaandthe
CanadianProvinceswith respectto this issue.
(2) DOG Determination that provincial stumpage
programsprovidea benefit
112. As outlinedabove,theDOG wasrequiredunderUnitedStatesandinternationallaw
to determinethattheprovincialstumpageprogramsconferredabenefitto theproducersof
softwood lumber. The DOG was obliged to make this determination“. . .in relation to
prevailingmarketconditionsfor thegoodor servicebeingprovided...,in thecountrywhich
is subjectto theinvestigationor review”. (emphasisadded)
113. In total disregardof the requirementsof United Stateslaw and the Respondent’s
internationalobligations,including its obligationsunderthe SCMAgreement,the DOG
declinedto use“in-country” benchmarks,despitethe factthat it haddoneso in LumberIII,
andinsteaduseda “cross-border”benchmark.
114. TheDOG’s determinationandprocessof determinationin this regardfell belowthe
standardrequiredof theUnitedStatesunderNAFTA Articles 1102, 1103,and 1105 in that
it was arbitrary andunreasonable,and led to a discriminatory and thereforeunfair and
inequitableresultby:
(1) failing to take into accountrelevantevidenceon the recordrelatingto “in-
country”benchmarks;
(2) acting in flagrant disregardof the Respondent’sinternationalobligations,
including under the SCM Agreementwhich required usean “in-country”
benchmark;
(3) failing to undertakea properandreasonablecomparisonof appropriateprices
to determineif a benefitwas indeedconferred;
Notice ofArbitration andStatementofClaim - Canfor Corporation 34
(4) taking into account irrelevant considerations, including United States
stumpageprices;
(5) failing to takeinto accountthefact that UnitedStatesstumpagerightsarenot
availablein Canadaandthatsomeof theUnitedStateswhosestumpageprices
it usedas benchmarksfor comparisonwith Canadianpricesprohibitedthe
exportof logs;
(6) failing to takeaccountof significantdifferencesbetweenconditionsin Canada
andtheUnitedStateswhichhadamaterialimpacton thecomparisonof prices
betweenthedifferentjurisdictions;
(7) violating its own regulationsin that the United Statesprices it usedas a
benchmarkweremanifestlynotworld marketprices;
(8) using an inappropriateconversion factor in comparing United Statesand
Canadianstumpageprices;
(9) comparingspeciesspecific pricesin Canadawith pricesin theUnitedStates
that werenot speciesspecific;
(10) usinginappropriatespeciescomparisonsin its cross-borderanalysis,
(11) usingUnitedStatesbid pricesinsteadof cut pricesin its cross-borderanalysis,
whichwasmanifestlyincorrectsincethosepriceswerebeingcomparedwith
stumpagechargeslevied in Canadaat thetime thelogs werecut;
(12) failing to considerevidenceon therecordthat thepriceor volumeof lumber
is not affectedby the price of stumpage;
(13) failing to takeintoaccountits previousdecisionson this issuein Lumberland
LumberIII, whereit hadconcludedthat to carryout across-borderanalysisto
determinewhetherabenefitwasconferredwouldbe“arbitrary andcapricious”
and inappropriate,when it knewthat therewere no materialchangesto the
circumstancesthat would justify sucha reversal;
(14) includingin its benefitcalculationanyeffectof LER, despitethefact that the
WTO hadruled in June,2001 that export restrictionscouldnot constitutea
NoticeofArbitration andStatementofClaim - Canfor Corporation 35
countervailablesubsidyanddespitethe fact that DOG hadmadeno findings
with respectto thecountervailabilityof LER,
(is) failing to takeaccountof the effect of the SLA on the price of logs in the
UnitedStatesandCanada;and
(16) denyingGanfor the benefit of a predictableand transparentlegal system
uninfluencedby improper considerationssuch as harming the Canadian
industry.
(3) Other DOG Determinations which result in violations
of NAFTA
115. In addition to the matters describedabove, the DOG’s PD-CVD fell below the
standardrequiredof theUnitedStatesunderNAFTA Articles 1102, 1103,and 1105in that
it wasalsoarbitraryandunreasonable,and led to adiscriminatory,andthereforeunfair and
inequitableresult. More particularly,theDOG:
(1) concludedthat provincialstumpageprogramsarespecific,whentheevidence
patentlydemonstratedotherwise;
(2) cameto numerousconclusionsthroughoutits analysiswhich violated US
internationalobligationsundertheSCMAgreementwhenit knewor oughtto
haveknownthatsuchviolationswouldmateriallyharmtheCanadiansoftwood
lumberindustryincluding Ganfor;
(3) assumedthat benefitsof theallegedfinancialcontributionwere passedonto
softwoodlumberproducersandsoftwoodlumbermanufacturerssuchasGanfor
without conductinganyor sufficient analysisto determinewhetherthatwas
true;
(4) calculateddutiesin sucha wayasto imposedutiesthat weregreaterthanthe
amountof theallegedsubsidyfoundto exist; and
Notice ofArbitration andStatementof Claim - Canfor Corporation 36
(5) directedthecollectionof dutieson an enteredbasis,ratherthanon thebasis
upon which theallegedsubsidyhadbeencalculated,contraryto its action in
LumberIII.
(iii) Violations of NAFTA — PD-CC
116. The actionsof theDOG in arriving at thePD-CCviolatedeachof NAFTA Articles
1102, 1103 and 1105. Its determinationthat critical circumstancesexistedsuch that
retroactive duties should be applied was arbitrary and unreasonable,and led to a
discriminatory,andthereforeunfair andinequitableresult.
117. As outlinedabove,tomakea critical circumstancesdeterminationtheDOG mustfind
that thereis a subsidywhich is inconsistentwith the SCM Agreement,suchasan export
subsidy,andmustfind that therehavebeen“massiveimports” overarelatively shortperiod
of time.
118. In thePD-CC,theDOG foundonly oneallegedexportsubsidy,which wasa Quebec
subsidy program to promote exports from Quebecto other parts of Canada.It also
determinedthat therehadbeenmassiveimports over the threemonth periodprior to its
decision.
119. Themannerin which theDOG cameto this resultwasarbitraryandunreasonable,
andled to a discriminatoryandthereforeunfair andinequitableresult in that:
(1) it actedin blatantdisregardof UnitedStatesandinternationallaw by deciding
that it could subjectall relevantCanadiansoftwoodlumberexportsto the
United Statesfor a retroactive90 day period to suspensionof liquidation,
bondingandpotential liabilities for dutieson the basisof a singleprovincial
program,despitethe fact that the allegedexportsubsidypossiblybenefited
only threecompaniesfrom the provinceof Quebec,relatedto only .0029%
NoticeofArbitration andStatementof Claim - Camifor Corporation 37
(ie. 29 one-millionths)of softwoodlumberexportsto theUnitedStates,and
createda potential retroactive liability for Canadianexporters including
Ganforexceeding$300 million, i.e., a multiple of morethan 1000 times the
amountof theallegedsubsidyin retroactivedutiesalone;
(2) it acted inconsistentlywith the DOG’s own caselaw which doesnot allow
applicationofcritical circumstancesfindingswherethesubsidyis lessthanthe
deminimuslevel of one percent;
(3) it disregardedthe Respondent’sinternationaland domesticobligationsby
finding “massiveimports” whenvirtually all of theimports reliedon to make
that determinationdid notbenefitin anywayfrom theallegedexportsubsidy;
(4) it improperlyandfor animproperpurposeexcludedimportsfrom theMaritime
provinces in its calculations in determiningthat there had been massive
imports,
(5) it usedapatentlyunfairanddiscriminatoryseasonalityadjustment,andignored
theeffectsof theterminationof theSLA; and
(6) it ignoredrelevantevidenceon therecordthat clearlydemonstratedthat the
subsidywaspayableon salesto otherCanadianprovincesaswell ason exports
to othercountries,andhencewasnot anexportsubsidy.
(iv) Violations of NAFTA — PD-ADD
120. Theactionsof theDOG in arrivingat thePD-ADD violatedeachof NAFTA Articles
1102, 1103 and 1105.
121. Any anti-dumping determinationmust, as a prerequisite,be basedupon a fair
comparisonbetweenthe productsallegedly beingdumped, and the productsallegedly
injuredorthreatenedwith injury in thedomesticmarket.ThePD-ADD wasnot basedupon
sucha faircomparison.Indeed,thecumulativeeffectof theapproachtakenby theDOGwas
suchasto fundamentallyundermineanyprospectof afair comparison,andto therebyensure
NoticeofArbitration andStatementofClaim - Canfor Corporation 38
a predeterminedresultin the investigation.The DOG’s determinationthat Ganforsold its
softwoodlumberat less than fair valueis unsupportedby the substantialevidenceon the
recordand is not in accordancewith United Statesandinternationallaw.
122. Specifically, the PD-ADD by DOG, and more particularly, the calculation of a
weightedaveragedumpingmarginof 12.98% for Ganfor,wasarbitraryandunreasonable,
and led to a discriminatoryandthereforeunfair andinequitableresult,in that:
(1) it was made in respectof a Petition filed by the Petitioners without
determiningthat the Petitionershadstandingto file the Petition or that the
Petition was filed on behalfof the domesticindustry asrequiredby United
Stateslaw;
(2) it was madewithout any, or sufficient, considerationof the argumentsand
evidencethat demonstratedGanforsold its softwoodlumberproductsin the
United Statesat pricesthat were aboveits costs andabovethe prices that
similar productsweresold in Canada1
(3) it failed to utilize a fair comparisonbetweenthe pricesof softwoodlumber
productsfrom Canadaand the pricesof similar productssold in the United
States;
(4) it utilizeda techniquecalledzeroing,therebyskewingthe averagedumping
marginswhenit knewthattheuseof that techniqueviolatedtheRespondent’s
obligationsunderthe WTOAnti-DumpingAgreement;
(5) it reliedupon unconsolidatedratherthanconsolidatedfinancialstatementsin
determininggeneralexpenseon salesdatawhen it knew or ought to have
knownrelianceuponunconsolidatedfinancialstatementswaslessaccurateand
wouldbe prejudicial to Ganfor’sinterest;
(6) it determinedproductcostbasedon volume asopposedto valuesuchthat it
did not properlyallocatejoint coststherebyattributingthe costof products
NoticeofArbitration andStatementofClaim - Canfor Corporatiomi 39
with significantly different valuesin the face of its own clear precedentand
WTO decisionsto thecontrary;and
(7) it blatantly ignoredrelevantevidenceand reliedupon irrelevantevidenceto
hold that Ganforchargedless thanmarketpricesfor woodchips, asoftwood
lumberby-product,to its affiliates.
(v) Violations of NAFTA — FD-GVD
123. The actionsof the DOG in arriving at theFD-CVD violateeachof Articles 1102,
1103 and 1105. Moreparticularly, thedeterminationof theDOG that Canadianstumpage
practicesarecountervailablesubsidieswasdiscriminatory,arbitrary andunreasonable,and
thereforeunfair andinequitableandfurtherexacerbatedtheharmcausedto theinvestorand
its investmentsby thePreliminaryDetermination.
124. To theextentthat theDOG repeated,or failed to adequatelyremedy,thebreaches
of NAFTA set out abovein connectionwith the PD-GVD, thenthe Investorrepeatsand
reliesupon themasfurther,or ongoing,breachesof NAFTA Articles 1102, 1103 and 1105
andincorporatestheallegationssetout above,insofarasthosesamematterswererepeated
in theFD-CVD.
125. In general,theDOG, in reachingtheFD-CVD wasarbitrary andunreasonable,and
cameto a discriminatory,andthereforeunfair and inequitableresult, in that:
(1) it madeits determinationwithout any, or anysufficient, considerationof the
argumentsandevidencebeforetheDOG1
(2) it failed to haveregardto the DOG’s own pastpractice;
(3) it misappliedtheapplicablelegal standard;
(4) it madeartificial andintentionally skewedcomparisonswhich couldonly be
designedto achievea particularresult,
(5) it continuedto utilize a cross-borderanalysis;and
NoticeofArbitration andStatementof Claim - Canfor Corporation 40
(6) it madenumerousrelevanterrorsin thecalculationsit did make.
126. In sum,theentirecourseof conductof theDOG in reachingtheED- CVD waseither
reckless,or alternativelywas intendedto arriveat a particularpre-determinedresult,which
couldonly bereachedby committingthe breachesof obligationandlaw outlinedherein.
Moreparticularly,thedeterminationthatprovincialstumpageprogramsconstitutedasubsidy
is unsustainableandcontraryto the Respondent’sinternationallaw obligations.
(vi) Violations of NAFTA — ED-ADD
127. The actionsof the DOG in arriving at theED-ADD violateeachof Articles 1102,
1103 and 1105. More particularly, as with the PD-ADD, the ED-ADD must, as a
prerequisite,bebaseduponafair comparisonbetweentheproductsallegedlybeingdumped,
andthe productsallegedlyinjuredor threatenedwith injury in the domesticmarket. The
ED-ADD wasnot baseduponsucha fair comparison.Rather,thecumulativeeffect of the
approach taken by the DOGwas such as to fundamentally undermine any prospect of a fair
comparison,andto therebyensurea predeterminedresult.
128. To theextentthat the DOG repeated,or failed to adequatelyremedy,thebreaches
of NAETAset out above in connection with the PD-ADD, then the Investor repeats and
reliesuponthem asfurther,or ongoing,breachesof NAETA Articles 1102, 1103 and 1105
and incorporates the allegations set out above, insofar as those same matters were repeated
in the FD-ADD.
129. In general,the DOG in reachingtheED-ADD and calculatinga weightedaverage
dumping margin of 5.96% for the investor, was arbitrary and unreasonable, and came to a
discriminatory, and therefore unfair and inequitable, result in that:
(1) it made its determination in respect of a Petition filed by the Petitioners
without determining that the Petitioners had standing to file the Petition, or
NoticeofArbitration andStatementofClaim - Canfor Corporation 41
that the Petitionwasfiled on behalfof thedomesticindustry asrequiredby
United States law;
(2) it was made without any, or insufficient, consideration of any arguments and
evidence before it, including evidence that demonstrated Ganfor sold its
softwood lumber products in the United States at prices that were above its
costs and above the prices that similar products were sold in Canada;
(3) it failed to utilize a fair comparison between the prices of softwood lumber
products from Canada and the prices of similar products sold in the United
States because, amongst other things, it arbitrarily excluded certain of them
from the calculations;
(4) it continued to utilize zeroing, thereby skewing the average dumping margins
when it knew that the use of that technique violated the Respondent’s
obligations under the WTOAnti-DumpingAgreement,
(5) it continued to overstate Canfor’s general expense rate by relying upon
unconsolidated rather than consolidated financial statements in determining
general expense on sales data when it know or should have known reliance
upon unconsolidated financial statements was less accurate and would be
prejudicial to Canfor’s interest; and
(6) it continued to determine product cost partially based on volume as opposed
to the value of the product produced such that it did not properly allocate joint
costs, by allocating costs based only on differences in grade and not
differences in value attributable to dimension or length, in the face of its own
clear precedent and WTO decisions to the contrary.
130. Furthermore, the imposition of anti-dumping duties on Ganfor, and the subjection of
Ganfor to an anti-dumping regime, such that Canfor can only sell its products into the
United States at full cost, whereas a United States competitor of Ganfor is lawfully entitled
to sell its products into the United States market at its incremental cost, accords Ganfor and
NoticeofArbitration andStatementofClaim - Canfor Corporatioii 42
its investment less than the best treatment available to the United States based competitors
of Ganfor and therefore violates NAETAArticle 1102.
(vii) Violations of NAFTA— Denial of due process
131. In coming to each of the PD-CVD, PD-CCand PD-ADD, and the FD-CVD and ED-
ADD, the DOGbreached the Respondent’s obligations under NAFTAChapter 11 to accord
substantive and procedural justice to Canfor and its investments, as more particularly set out
below.
(a) Burden not met to implement interim remedy before full
hearing on merits
132. To accord substantive and procedural justice to Canfor and its investments as required
under NAFTAArticle 1105,the DOGwas obligated not to impose punitive relief such as the
imposition of provisional duties without having sufficiently determined that such relief was
warranted. The DOGwas obligated to ensure that its actions would not unnecessarily
interfere with the legal rights of parties affected, such as Ganfor, and would be proportional
to the particular circumstances.
133. In the present case, the DOGdid not accord substantive and procedural justice, in
that it
(1) imposed preliminary duties prior to a full and fair hearing on the merits, and
prior to anydemonstration of injury to the Petitioners;
(2) took no or insufficient account of the damage and interference to the normal
commercial activity of the Canadian Softwood lumber industry including
Ganfor, its property, or its general legal rights before coming to its
determination; and
(3) did not tailor the provisional duties to the avoidance of identified harm to the
Petitioners or to preventing actions by Canfor or other Canadian investors that
NoticeofArbitration andStatementofClaim - Canfor Corporation 43
would frustrate or render impossible an effective remedy once a full
determinationon themeritshadbeenmade.
(b) Canfor denied accessto independent and impartial decision
maker
134. Under international law, including NAFTAArticle 1105, Canfor is entitled to have
its rights determined before an independent and impartial decision maker. However, in this
case, Grant Aldonas, Under-Secretary for International Trade Administration and a senior
official with the Government of the United States, was involved in the DOGdecision
making process while also both advising the Government of the United States and taking an
active role in the Government of the United States’ negotiations with Canada and had
prejudged the case prior to any determination. Accordingly, Ganfor was denied its right to
an independent and impartial decision maker.
(c) Canfor denied fundamental fairness and equity
135. Furthermore, in coming to each of the PD-GVD, PD-CC and PD-ADD, and the FD-
GVDand FD-ADD, the DOGalso breached fundamental principles of fairness and equity,
and denied Ganfor basic justice in that:
(1) it allowed its independence and impartiality to be fettered by directions in the
Statement of Administrative Action in connection with the adoption of the
URAA,
(2) it reliedupon informationwhich wasprejudicial to Ganfor, without providing
Ganfor a fair and reasonable opportunity to respond to that information,
(3) it accepted prejudicial evidence from the Petitioners and their representatives
after a DOGmandated deadline without providing Ganfor with a fair and
reasonable opportunity to respond to that information;
Notice ofArbitration andStatementof Claim - Canfor Corporation 44
(4) it held ex parte meetingswith the Petitionerwithout disclosingto Ganfor
specific details of the meetings in order to allow Ganfor a fair and reasonable
opportunity to respond;
(5) it imposed unrealistic and unfair time periods for providing information,
making submissions and responding to other parties’ submissions,
(6) it failed to address material evidence and arguments in its determinations,
(7) it initiated the investigations in response to the Petitions without sufficient
evidence of a subsidy or injury and without taking any, or sufficient, steps to
ensure objectively the existence of sufficient support for the Petitions by the
United States softwood lumber industry, and
(8) it denied Ganfor a full and fair hearing on the merits.
(d) Ganfor denied an opportunity to obtain companyspecific
CVD rate
136. NAFTA Article 1105 incorporatesa requirementfor a transparentlegal systemsuch
that all relevant legal requirementsfor the successfuloperation of an investmentin the
UnitedStatescanbereadilyknown.
137. InternationalandUnitedStateslaw providesthat in a GVD investigationindividual
subsidyrates will be establishedfor eachknown exporteror producerof the relevant
merchandise, subject to limited exceptions. One such exception is that an investigating
authority may, in limited circumstances, establish a countrywide rate. If a countrywide rate
is utilized and if a request is made by an exporter or producer, an individual subsidy rate must
be promptly established by the investigating authority for that exporter or producer unless
the number of such requests would place an undue burden on the DOG.
138. In the present case, DOG, contrary to established practice and without providing any
reasonedanalysis,determinedto establisha countrywiderate.
NoticeofArbitration andStatemnentofClaimn - Camifor Corporation 45
139. As outlined above,on May 30, 2001, Canfor, as the largestexporterof softwood
lumberto the United States,and a requiredrespondentin the concurrentanti-dumping
investigation,submitteda timely requestfor theestablishmentof an individual subsidyrate,
and requestedDOG to send it a questionnaireso that it could supply the necessary
informationuponwhich to basesucha rate. GanforspecificallyadvisedDOGthat it could
demonstratethat it payssubstantiallymorefor stumpagethantheaveragelumberproducer
in British Columbia,andtherefore,if stumpagewas foundto beasubsidy,Ganforwould be
ableto demonstratethat it receivedlittle, if any,benefitfrom it. DOG failed to respondto
Ganfor’sletter,andfailed to establishan individual subsidyratefor Canforin eitherthePD-
GVD orthe FD-GVD. In theED-CVD, DOG statedthat underUnitedStates’CVD law,
therewas no right to an individual subsidyrate in a casewhere a countrywideratewas
established,which is patentlyincorrect.DOGalsostatedthatCanfor shouldhavesubmitted
a responseto thequestionnaireprovidedto thegovernmentof Canada,despitethefactthat
that questionnairewasdesignedfor thegovernmentandnot a corporation,anddespitethe
fact that the DOG failed to inform Ganfor in a timely way or a reasonablemannerthat it
couldrespondto this questionnaire.No otherexporteror producersubmittedarequestfor
an individual ratein a timely fashion,andDOG did notfind that establishingan individual
ratefor Canfor would haveplacedan undueburdenon it.
140. The DOG’s actionsand its determinationsin this respect,either individually or
collectively,werearbitraryandunreasonable,andthereforeviolatedArticle 1105ofNAFTA
by:
(1) arbitrarilydeterminingthat a countrywideratewould be utilized,
(2) blatantly ignoring Canfor’s requestfor an individual rate,when it knew or
ought to have known that by doing so it violated the United States
internationalobligations,and further that its inaction would causeGanfor
harm,
NoticeofArbitration amid StatementofClaim - Canfor Corporation 46
(3) failing to ensurethat its legal regimein this regardwas transparentsuchthat
all relevantlegal requirementsfor successfuloperationof an investmentin the
UnitedStateswasreadilyknownincluding therequirementsto be fulfilled by
a companysuchasGanforwhen requestinga company-specificrate,
(4) by imposingpost-factothat Ganformust submitvoluntarily a questionnaire
specificallydesignedfor aresponseby theGovernmentof Canada,ratherthan
by acorporation,asapreconditionforacompany-specificsubsidyratewithout
bringingthisrequirementto Ganfor’sattentionin a timely wayorareasonable
manner~and
(5) byinterpretingUnitedStateslaw,morespecificallysection782(a)oftheTariff
Act,in a waywhich it kneworoughtto haveknownwould bein breachof the
UnitedStatesinternationalobligations.
(viii) Violations of NAFTA — Byrd Amendment
141. TheactionsoftheRespondentin adoptingtheByrdAmendmentandin its application
or intendedapplicationto softwoodlumbercountervailingandanti-dumpingdutieslevied
on Ganfor,suchthat thosedutieswill beredistributedfrom Ganforto the Petitioners- who
arealready receivingthe benefitof beingableto subjectCanforand its investmentsto a
costly, arbitrary and discriminatorylegal processthat has resultedin the imposition of
prohibitivedutiesuponthem, is blatantlydiscriminatoryandviolatesNAFTA Articles 1102,
1103 and 1105.
142. The United Statescompetitorsof Ganforand its investmentsarebeingprovideda
level of treatmentbetterthanthat of Ganforandits investmentswhich cannotbe justified
in the circumstancesin which thesecompetitorsoperate.
143. TheByrdAmendmentandits intendedapplicationin thepresentcircumstancesdenies
Canfor and its investmentsthe best treatmentavailable to investorsand investmentsof
Notice ofArbitration andStatementof Claim - Canfor Corporation 47
investorsof theUnitedStates.The besttreatmentavailableto investorsandinvestmentsof
investorsof theUnitedStatesis anexemptionfrom anyobligationto paycountervailingand
anti-dumpingdutieswherethosedutiesareimposedthrougha discriminatory,arbitraryand
unfairprocess,andanentitlementto sharein theproceedsofanysuchdutiesasarecollected.
144. More particularly the Byrd Amendmentfalls below the standardrequiredof the
UnitedStatesunderNAFTA Articles 1102, 1103,and 1105, in that it:
(1) createsa financial incentivefor thedomesticindustryto initiate andsupport
frivolous and vexatious anti-dumping and countervailing duty petitions,
irrespective of their merit, by promisingto distributeany dutiesultimately
collectedto thosemembersandonly thosemembersof thedomesticindustry
thatsupportedapetition,andnotto anymembersof theindustrythat did not~
(2) createsanaffirmativeincentiveto ensuresuchpetitionsarenotresolvedother
thanby the impositionof final duties,
(3) discouragesthe use of undertakingsas a resolution of anti-dumpingand
countervailingdutycomplaints,asdomesticindustryis financiallyencouraged
to supportonly theimposition of duties;
(4) artificially distortsthesupportfor anyparticularpetitionby, in effect,paying
the domesticindustryto supportit, (in thepresentcaseto thepotential level
of severalhundredmillion dollarsperyear),
(5) ensuresthatanyanti-dumpingorcountervailingdutiesimposedto remedyany
proven dumping or to neutralizethe impactof countervailablesubsidiesis
over-remedied,in that the redistributionof suchdutiesdistorts the United
Statesmarketplacein favour of the domesticUnited Statesindustry at the
expenseof Ganforand its investmentsandthosein its position,and
(6) creates a systemic bias in favour of a petition meeting the standing
requirementsof UnitedStatesantidumpingandcountervailingduty law. If a
memberof thedomesticindustrydoesnot supportapetitionthat is ultimately
NoticeofArbitrationandStatementofClaim - Canfor Corporation 48
successful,thenthatmemberof theindustrywould seeits competitorsgainan
immediatefinancialadvantageover it, andaccordinglyis inducedto support
sucha petition.
145. In the presentcase,thePetitionswereinitiated by thePetitionersandsupportedby
othersin thedomesticindustrybecauseof thefinancialbenefitthat wouldbeconferredon
the domestic industry by the imposition and redistribution of anti-dumping and
countervailingdutiesunder the Byrd Amendment. Accordingly, the decision that the
Petitioners had standing to bring initiate the Petitionswas madeon the basisof the Byrd
Amendmenthavingartificially increasedthesupportfor thesePetitions.
146. The Byrd Amendmentis inconsistentwith Respondent’sobligationsunderGATE
1994 and the Anti-DumpingAgreementandwith the SCM Agreement.UnderNAETA
Article 1105, the Respondentis obliged to honour its GAIT and SCM Agreement
obligationsin goodfaith, insofarasthoseobligationsaffect its treatmentof Ganforandits
investments.
147. As a result,individually andcollectively,theactionsof theDOG, togetherwith such
otherconductasis describedhereinandaswill beadducedin evidenceatthehearingof this
matter,violate theRespondent’sobligationsunderNAFTA to ensurethat investorssuchas
Ganforandits investmentsareaccordedtreatmentin accordancewith internationallaw,are
in all casesafforded fair and equitabletreatment,and are accordedtreatmentno less
favourablethan their competitors,and particularly the Petitionerswho benefit from the
Respondent’sconduct.
(ix) The Respondent’sActions are an Expropriation
148. The aggregateeffect of the measuresdescribedherein has been to substantially
depriveGanforof thebenefitof its investmentsin theUnitedStates,withoutcompensation,
NoticeofArbitration and Statemnemit ofClaimn - Canfor Corporatiom: 49
by imposingmeasuresspecificallydesignedto renderGanfor’sUnitedStatesbasedbusiness
model inutile, impairing its ability to makefull useof its investmentwithin theUnitedStates.
Thecumulativeeffectof theconductof theRespondentasoutlinedhereinhassubstantially
interferedwith Canfor’s investmentsin the United Statesandhas deprivedGanfor the
opportunityto marketanddistributesoftwoodlumberin theUnitedStatesmarketata profit.
IV. DAMAGE
149. The effectof theRespondent’sactions,including theaffirmative PD-GVD, PD-CC
andPD-ADD, theED-GVD andED-ADD, andtheITG-ED hasbeento imposeharmupon
Ganforand its investments,andhasdeprivedGanforof its economicinterestsandproperty
without due processof law or adequateproceduralsafeguards. Becauseof the palpable
uncertaintyaboutpriceandmarketconditionsthatwasinstantly createdby the preliminary
determination,saleshavebeenlost, relationswith customershavebeendisrupted,andlong
term corporateand industry planning hasbeenimpaired. More particularly, damageto
Ganforincludes,but is not limited to:
(1) Past incomeloss up to and including the dateof filing of this Statementof
Claim1
(2) Future incomelossasaresultof thewrongful conductof theUnitedStates,
(3) Duties paidor to be paid;
(4) Reducedprices on softwoodlumber sold in Canadaby virtue of Canadian
price discountsdemandedby customersto reflect prices to shipmentsto
UnitedStatescustomers1
(5) Losscausedby foregonecapital investment,
(6) Bondingcosts,
(7) Increasedstumpagecosts,
(8) Costsof incrementaldowntime,
(9) Loss of tax losscarryforwards,and
(10) Incrementalmanagementcosts.
Notice ofArbitratiom, amid Statememitof Claim - Camifor Corporatiomi 50
V. POINTS AT ISSUE
151. Hasthe Respondenttakenmeasuresinconsistentwith its obligationsunderSection
A of Chapter 11 of NAFTA, and if so, hasGanforincurredlossor damageby reasonof, or
arising out of, that breach? If so, what is the quantumof compensationpayableto the
investor.
VI. RELIEF OR REMEDY SOUGHT
152. Ganforclaims compensationin an amountnot less than 250 million United States
dollars,togetherwith thecostsof this Arbitration, all professional,legalandexpertfeesand
disbursements,andinterest.
ALL OF WHICH IS RESPECTFULLY SUBMITTED
Keith E.W. Mitchell
July 9, 2002 #1726207
Notice ofArbitratiomi andStatementofClaim - Canfor Corporation 51
APPENDIX
Article 1102: National Treatment
1. EachPartyshall accordto investorsof anotherPartytreatmentno lessfavourablethanthat it accords,in like circumstances,to its own investorswithrespectto the establishment,acquisition,expansion,management,conduct,operation,and saleor otherdispositionof investments.
2. EachParty shall accordto investmentsof investorsof anotherPartytreatmentno less favourablethanthat it accords,in like circumstances,toinvestmentsof its own investorswith respectto theestablishment,acquisition,expansion,management,conduct,operation,andsaleor otherdispositionofinvestments.
3. The treatmentaccordedby a PartyunderparagraphsI and 2 means,with respectto a stateor province,treatmentno lessfavourablethanthemostfavourabletreatmentaccorded,in like circumstances,by thatstateor provinceto investors,andto investmentsof investors,of thePartyof which it formsapart.
4. For greatercertainty,no Partymay:
(a) imposeon an investorof anotherPartya requirementthat aminimumlevel of equity in an enterprisein the territory of the Party be held by itsnationals,otherthannominal qualifying sharesfor directorsor incorporatorsof corporations,or
(b) requirean investorof anotherParty,by reasonof its nationality,to sellor otherwisedisposeof an investmentin theterritory of the Party.
Article 1103: Most-Favoured Nation Treatment
1. EachPartyshallaccordto investorsof anotherPartytreatmentno lessfavourablethanthat it accords,in like circumstances,to investorsof anyotherParty or of a non-Party with respect to the establishment,acquisition,expansion,management,conduct,operation,andsaleor otherdispositionofinvestments.
NoticeofArbitration and Statementof Claim - Canfor Corporation 52
2. EachParty shall accordto investmentsof investorsof anotherPartytreatmentno less favourablethan that it accords,in like circumstances,toinvestmentsof investorsof anyotherPartyor of a non-Partywith respecttotheestablishment,acquisition,expansion,management,conduct,operation,and saleor otherdispositionof investments.
Article 1105: Minimum Standard of Treatment
1. EachPartyshall accordto investmentsof investorsof anotherPartytreatmentin accordancewith internationallaw, including fair andequitabletreatmentandfull protectionandsecurity.
2. Without prejudice to paragraph 1 and notwithstanding ArticleI 108(7)(b),eachParty shall accordto investorsof anotherParty, and toinvestments of investors of another Party,non-discriminatorytreatmentwithrespectto measuresit adopts or maintains relating to losses suffered byinvestmentsin its territory owing to armedconflict orcivil strife.
3. Paragraph 2 doesnotapplyto existingmeasuresrelatingto subsidiesorgrantsthatwouldbeinconsistentwith Article 1102butfor Article I 108(7)(b).
Article 1110: Expropriation
1. No Party may directly or indirectly nationalizeor expropriateaninvestmentof an investorof anotherPartyin its territory or takea measuretantamount to nationalization or expropriation of such an investment(“expropriation”), except:
(a) for a public purpose,
(b) on a non-discriminatorybasis;
(c) in accordancewith dueprocessof law andArticle 1105(1),and
(d) on paymentof compensationin accordancewith paragraphs2 through6.
2. Compensationshall be equivalentto the fair market value of theexpropriatedinvestmentimmediately before the expropriationtook place(“date of expropriation”),andshall not reflect anychangein valueoccurringbecausethe intendedexpropriationhadbecomeknown earlier. Valuation
NoticeofArbitration and Statementof Claim - Canfor Corporation 53
criteriashall include goingconcernvalue, assetvalueincluding declaredtaxvalueof tangibleproperty,andothercriteria,asappropriate,to determinefairmarketvalue.
3. Compensationshallbe paidwithout delayandbe fully realizable.
4. If payment is made in a G7 currency,compensationshall includeinterestat a commerciallyreasonableratefor that currencyfrom the dateofexpropriationuntil thedateof actualpayment.
5. If a Party electsto pay in a currencyother thana G7 currency,theamountpaidon the dateof payment,if convertedinto a G7 currencyat themarketrateof exchangeprevailingon that date,shall be no less than if theamount of compensationowed on the date of expropriation had beenconvertedinto thatG7currencyatthemarketrateof exchangeprevailingonthat date,andinteresthadaccruedat acommerciallyreasonableratefor thatG7 currencyfrom thedateof expropriationuntil thedateof payment.
6. On payment,compensationshallbe freely transferableasprovidedinArticle 1109.
7. This Article doesnot apply to the issuanceof compulsorylicensesgrantedin relation to intellectual property rights, or to the revocation,limitation or creationof intellectual propertyrights, to the extentthat suchissuance,revocation, limitation or creation is consistent with ChapterSeventeen(IntellectualProperty).
8. For purposes of this Article and for greater certainty, a non-discriminatory measureof general application shall not be consideredameasuretantamountto anexpropriationof a debtsecurityor loancoveredbythis Chaptersolely on the groundthat the measureimposescosts on thedebtorthat causeit to defaulton thedebt.
Cantor Corporation im.miipuu±~
and subsidiaries
May 23, 2002
The Governmentof theUnited Statesof AmericadoExecutiveDirector,Office ofthe Legal AdvisorUnitedStatesDepartmentof StateRoom 5519,2201C Street,N. W.WashingtonD.C. 20520
Dear Sirs/Madams:
Re: Canfor Corporation v. The Governmentofthe UnitedStatesofAmericaInvestor-StateDispute Pursuant to Chapter 11 ofthe NAFTA
Pursuantto Article 1121(1)(a) of the North America Free Trade Agreement(“NAFTA”),Canfor Corporationconsentsto arbitration in accordancewith the proceduresset out in theNAFTA; and
Pursuant to Article 1121(1)(b) oftheNAFTA, CanforCorporationwaives its right to initiateor continue before any administrativetribunal or court under the law of any Party to theNAFTA, or otherdisputesettlementprocedures,any proceedingswith respectto themeasuresof the Governmentof the United Statesof America in any measurethat areallegedto be abreachreferredto in Article 1116,exceptfor proceedingsfor injunctive, declaratoryor otherextraordinaryrelief, not involving thepaymentof damages,beforean administrativetribunalor courtunderthe lawsoftheUnited StatesofAmerica.
Canfor Corporation
28OO~1O55Dunsmuir Street, Post Off~ceBox 49420. Bentall Postal Station, Vancouver, British Columbia, Canada V7X 1B5~ f~flz1~n~lc~Ai l~v 1~flA\~i,~97’~
Canadian Forest Products Ltd.
andaffiliated companies
May 23,2002
TheGovernmentoftheUnited Statesof Americac/oExecutiveDirector,Office oftheLegalAdvisorUnited States Department of StateRoom 5519,2201 C Street,N.W.WashingtonD.C. 20520
Dear Sirs/Madams:
Re: Canfor Corporation v. The Governmentof the UnitedStatesofAmerica
Investor-StateDisputePursuant to Chapter 11 of the NAFTA
Pursuant to Article I 121(1)(b)of theNAFTA, Canadian Forest Products Ltd. waivesits rightto initiate or continuebeforeany administrativetribunalorcourtunderthe law ofanyPartytothe NAFTA, or other disputesettlementprocedures,any proceedingswith respectto themeasurestakenby the GovernmentoftheUnited Statesof Americathat areallegedto be abreachreferredto in Article 1116,exceptfor proceedingsfor injunctive, declaratoryor otherextraordinaryrelief, not involving the paymentof damages,beforean administrativetribunalorcourtunderthe lawsof theUnited StatesofAmerica.
Canadian Forest ProductsLtd.
2900—1055 Dunsmuir Street, Post Office Box 49420, Bentall Postal Station, Vancouver, British Columbia, Canada V7X 1B5Th!,~nhc,np(Afl4~P~~1-5241 Fax (5041 551-5235 E-mail info@canfor,ca Web www.canfor.com
Canfor Wood Products Marketing Ltd.
a subsidiary of Canadian Forest Products Ltd.
May23, 2002
TheGovernmentoftheUnitedStatesofAmericac/o ExecutiveDirector,Office oftheLegalAdvisorUnitedStatesDepartmentof StateRoom5519, 2201C Street,N.W.WashingtonD.C. 20520
Dear Sirs/Madams:
Re: Canfor Corporationv. The Governmentofthe UnitedStatesofAmericaInvestor-StateDispute Pursuant to Chapter 11 oftheNAFTA
Pursuant to Article I 121(1)(b) of the NAFTA, Canfor Wood Products Marketing Limitedwaives its right to initiate or continue before any administrative tribunal or court under thelaw ofany Party to the NAFTA, or other dispute settlementprocedures, any proceedingswithrespectto the measurestakenby the Governmentof the United Statesof America that areallegedto be a breachreferredto in Article 1116, except for proceedingsfor injunctive,declaratoryor other extraordinaryrelief, not involving the paymentof damages,before anadministrativetribunalor courtunderthe lawsoftheUnitedStatesofAmerica.
Canfor Wood Products Marketing Ltd.
301 — 1700 West 75th Avenue, Vancouver, British Columbia, Canada V6P 6G2 Web cwpm.canfor.com- - . . . . ~ fl_fl_ r_.. Aa~: rfl.. ~flA OCA Cflflfl
Cantor U.S.A. Corporation
May 23, 2002
TheGovernmentoftheUnitedStatesof Americac/o ExecutiveDirector,Office oftheLegal AdvisorUnitedStatesDepartmentof StateRoom 5519,2201 C Street,N.W.WashingtonD.C. 20520
Dear Sirs/Madams:
Re: Canfor Corporation v. The Governmentof the UnitedStatesofAmerica
Investor-StateDisputePursuant to Chapter 11 of the NAFTA
Pursuantto Article 1 121(1)(b)of theNAFTA, CanforUSA Corporationwaives its right toinitiate or continue before any administrative tribunal or court underthelaw of anyParty tothe NAFTA, or other dispute settlementprocedures,any proceedingswith respectto themeasures,takenby theGovernmentoftheUnited Statesof America that areallegedto beabreach referred to in Article 1116, exceptfor proceedingsfor injunctive, declaratoryor otherextraordinary relief, not involving the paymentof damages,beforean administrativetribunalor court under the laws of the United States of America.
Canfor U.S.A. Cornoration
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