DS: United States — Countervailing Measures on Supercalendered Paper from Canada

1. This dispute concerns the imposition by the United States of certain countervailing measures on imports of SC Paper from Canada, as well as the United States' alleged ongoing conduct of applying adverse facts available (AFA) in respect of programmes discovered during the course of a CVD investigation.
2. Canada presented a series of claims concerning: (a) the USDOC's determinations in the original CVD investigation with respect to Port Hawkesbury Paper LP (PHP), including claims regarding the provision of electricity to PHP by Nova Scotia Power Incorporated (NSPI); the assistance under the hot idle funding and the Forestry Infrastructure Fund (FIF); and the provision of stumpage and biomass; (b) the USDOC's determinations in the original CVD investigation with respect to Resolute FP Canada Inc. (Resolute), including the claims regarding the application of AFA in relation to information discovered at verification; Resolute's purchase of Fibrek General Partnership (Fibrek); and the alleged subsidies provided under the Federal Pulp and Paper Green Transformation Programme (PPGTP), the Ontario Forest Sector Prosperity Fund (FSPF) and the Ontario Northern Industrial Electricity Rate (NIER) programme; (c) the USDOC's determinations in the original CVD investigation with respect to the all-others rate affecting the non-investigated companies Irving Paper Ltd. (Irving) and Catalyst Paper Corporation (Catalyst); (d) the USDOC's determinations in the expedited reviews conducted for the non-investigated companies Irving and Catalyst; and (e) the United States' alleged “ongoing conduct” of applying AFA in respect of programmes discovered during the course of a CVD investigation, or “Other Forms of Assistance-AFA” measure.
3. On the claims concerning the USDOC's determination in the original CVD investigation with respect to PHP, the Panel concluded as follows:
1. The USDOC acted inconsistently with Article 1.1(a)(1)(iv) of the SCM Agreement, by making a finding of entrustment or direction with respect to the provision of electricity by NSPI.
2. The USDOC acted inconsistently with Articles 1.1(b) and 14(d) of the SCM Agreement, when it determined that the provision of electricity by NSPI to PHP conferred a benefit.
3. The USDOC acted inconsistently with Article 12.8 of the SCM Agreement, by failing to disclose to interested parties the essential fact that, in the view of the USDOC, Section 52 of the Public Utilities Act entrusted or directed NSPI to provide electricity to all customers, including PHP.
4. The USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement, by finding that the hot idle funding conferred a benefit on PWCC/PHP.
5. The USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement, by finding that the second FIF amount conferred a benefit on PWCC/PHP.
6. The USDOC acted inconsistently with Article 11.3 of the SCM Agreement, by failing in its obligation to evaluate the accuracy and adequacy of the evidence in the application with respect to the existence of a benefit in the provision of stumpage and biomass by the Government of Nova Scotia to PHP.
4. On the claims concerning the USDOC's CVD determination in the original investigation with respect to Resolute, the Panel concluded as follows:
1. The USDOC acted inconsistently with Article 12.7 of the SCM Agreement, by applying facts available to the discovered programmes.
2. The Panel declined to rule on Canada's claims under Articles 11.2, 11.3, 12.1, 12.2, 12.3, and 12.8 of the SCM Agreement, regarding the discovered programmes.
3. The USDOC acted inconsistently with Article 1.1(b) of the SCM Agreement, by finding, on the basis of an alleged lack of relevant evidence, that the benefit conferred on Fibrek through the PPGTP was not extinguished when Fibrek was acquired by Resolute.
4. The Panel declined to rule on Canada's claims under Articles 10, 14, 19.1, 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994, regarding the USDOC's finding that the benefit conferred on Fibrek through the PPGTP was not extinguished when Fibrek was acquired by Resolute.
5. The Panel declined to rule on Canada's claims under Articles 1.1(b), 10, 14, 19.1, 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994, regarding the USDOC's finding that the benefit conferred on Fibrek was not extinguished when Fibrek was acquired by Resolute, with respect to the alleged assistance discovered during the verification of Fibrek.
6. The USDOC acted inconsistently with Articles 10, 19.1, 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994, by attributing to the production of SC Paper subsidies provided to Resolute and Fibrek under the PPGTP, FSPF, and NIER Programmes.
7. The Panel declined to rule on Canada's claims under Articles 10, 19.1, 19.3, and 19.4 of the SCM Agreement and Article VI:3 of the GATT 1994, regarding the attribution to the production of SC Paper of the alleged assistance discovered during the verification of Fibrek.
5. On the claims concerning the CVD determinations with respect to Irving and Catalyst, the Panel concluded as follows:
1. The USDOC acted inconsistently with Articles 10, 19.1, 19.3, 19.4, and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994, by constructing the all-others rate relying on Resolute's rate, which was mainly calculated using AFA.
2. The Panel declined to rule on Canada's claim under Article 12.7 of the SCM Agreement, regarding the construction of the all-others rate relying on Resolute's rate.
3. The Panel rejected Canada's claims under Articles 10, 19.1, 19.3, 19.4, and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994, regarding the USDOC's failure to adjust the all-others rate in respect of subsidies that were not available to non-investigated exporters.
4. The USDOC acted inconsistently with Article 19.3 of the SCM Agreement, by including new subsidy allegations in the context of the expedited reviews undertaken for Catalyst and Irving.
5. The Panel declined to rule on Canada's claims under Articles 11.2 and 11.3 of the SCM Agreement, regarding the USDOC's alleged initiation of an investigation into new subsidy allegations during the expedited reviews of Catalyst and Irving.
6. On the claims concerning the “Other Forms of Assistance-AFA measure”, the Panel concluded as follows:
1.  Canada adduced sufficient evidence to establish that the challenged “Other Forms of Assistance-AFA measure” constitutes “ongoing conduct” and, therefore, the Panel did not consider it necessary to address Canada's argument that the challenged measure amounts to a “rule or norm of general and prospective application”.
2. The unwritten “ongoing conduct” measure challenged by Canada is inconsistent with Article 12.7 of the SCM Agreement.
3. The Panel declined to rule on Canada's claims under Articles 10, 11.1, 11.2, 11.3, 11.6, 12.1, and 12.8 of the SCM Agreement, with respect to the “Other Forms of Assistance-AFA measure”.

Existence of the OFA‑AFA measure as “ongoing conduct”

At the outset, the Appellate Body disagreed with Canada's contention that the United States' appeal fell outside the scope of appellate review. To the Appellate Body, the United States' appeal concerned the Panel's understanding and application of the legal standard for “ongoing conduct” in WTO dispute settlement.

The United States appealed the Panel's finding that the OFA-AFA measure is “ongoing conduct” that could be challenged in WTO dispute settlement. The Appellate Body agreed with the Panel that the differences referred to by the United States did not detract from the fact that the substance of the USDOC's conduct remained the same in relation to the elements of the measure. The Appellate Body also disagreed with the United States that repeated application must be demonstrated through a string of determinations made sequentially in successive proceedings over an extended period of time. Finally, the Appellate Body agreed with the Panel that the consistent manner in which the USDOC refers to the OFA-AFA measure, the frequent reference to previous applications of the measure in USDOC determinations, the fact that the USDOC refers to the measure as its “practice”, and the USDOC's characterization of a departure from the measure as an “inadvertent error” all support the conclusion that the measure is likely to continue to be applied. The Appellate Body therefore upheld the Panel's finding that the OFA‑AFA measure exists as “ongoing conduct” that could be challenged in WTO dispute settlement.

In a separate opinion, one Appellate Body Member considered that the Panel erred by characterizing the USDOC's conduct in an unacceptably vague manner. To that Appellate Body Member, the Panel did not examine the comparability of the CVD proceedings used as evidence of the “ongoing conduct”, which undermined the Panel's ability to define the precise content, repeated application, and likelihood of continued application of the measure. That Appellate Body Member also noted that the CVD order in Supercalendered Paper from Canada 2015 had been revoked. To that Appellate Body Member, as this was the only CVD proceeding involving Canada in this dispute, there was no real dispute between the participants. In this respect, the majority noted that the United States filed its appeal after the revocation of that CVD order and that both participants confirmed that there was a dispute between them.

Article 12.7 of the SCM Agreement

The Appellate Body disagreed with the United States' claim that the Panel erred under Article 12.7 of the DSU by failing to provide a “basic rationale” for its finding under Article 12.7 of the SCM Agreement. To the Appellate Body, the Panel incorporated its earlier analysis concerning Article 12.7 of the SCM Agreement into its examination of the OFA-AFA measure.

The Appellate Body also disagreed with the United States' claim that the Panel erred in finding that the OFA‑AFA measure is inconsistent with Article 12.7 of the SCM Agreement. The Appellate Body first found that the Panel did not inappropriately ignore the “significantly impedes” ground for using “facts available” under Article 12.7 of the SCM Agreement. This was because the Panel's analysis was limited to circumstances where the USDOC uses “facts available” when a respondent fails to provide “necessary information”. Further, to the Appellate Body, the Panel faulted the USDOC for mechanically concluding that necessary information had not been provided and that the discovered assistance amounted to a countervailable subsidy. The Appellate Body agreed with the Panel that the USDOC could not simply reach conclusions without further analysis and regard to the facts available on the record and the due process rights of interested parties. The Appellate Body thus concluded that the United States had not demonstrated that the Panel erred in its analysis under Article 12.7 of the SCM Agreement. Consequently, the Appellate Body upheld the Panel's finding that the OFA-AFA measure is inconsistent with Article 12.7 of the SCM Agreement.

Canada had requested DSB authorization to suspend concessions or other obligations to the United States at a level that would be commensurate with the trade effects of any future countervailing duties on Canadian imports that are attributable to the US measure that had been found to be WTO-inconsistent “ongoing conduct” in this dispute. This request was based on Canada's assertion that the United States had failed to implement the DSB recommendations and rulings concerning such ongoing conduct.

The decision by the Arbitrator was circulated to WTO Members on 13 July 2022. The Arbitrator determined that the appropriate level of nullification or impairment would be determined by Canada in the future based on a prescribed partial equilibrium Armington model if and when the WTO-inconsistent ongoing conduct was used to impose CVDs against imports of Canadian goods into the United States. Canada could then suspend concessions or other obligations in the goods sector at an equivalent amount. The Arbitrator also determined that Canada is entitled to adjust a given level of suspension to account for annual inflation.