UNDER THE UNCITRAL ARBITRATION RULES AND 11 Notice of... · 2014-07-27 · under the uncitral arbitration rules and section b of chapter 11 of the north american f1u~etrade agreement

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


(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


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


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.


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


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


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.


(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


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.


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.


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.


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


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


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:


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.


(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


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


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.


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


(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;


(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


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


(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


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


(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


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


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;


(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


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.


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


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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UNDER THE UNCITRAL ARBITRATION RULES AND 11 Notice of... · 2014-07-27 · under the uncitral arbitration rules and section b of chapter 11 of the north american f1u~etrade agreement