ࡱ> u@ ̬bjbj JH"$///P@04t0L@W00L111111VVVVVVV$\YR[V11111V11VB4B4B4111VB41VB4B44cM8V10 /3FU<3VW0@WU<\&4\xV\V 11B411111VVD/&4/ ANNEX B PARTIES RESPONSES TO QUESTIONS FROM THE SECOND MEETING ContentsPageAnnex B-1 Canada's Responses to Questions from the Panel - Second MeetingB-2Annex B-2 United States' Responses to Questions from the Panel - Second MeetingB-6 ANNEX B-1 CANADA'S RESPONSES TO QUESTIONS FROM THE PANEL - SECOND MEETING (17 October 2003) To Canada Question 5. At para. 47 of its second oral statement, Canada refers to the failure of the USITC to evaluate the effects of any factor other than subject imports, in its threat analysis not to mention its failure to separate and distinguish such effects from those attributed to the subject imports. Is Canada suggesting that the asserted obligation to separate and distinguish the effects of other factors from those attributed to subject imports requires some particular kind of analysis that consists of separating and distinguishing? Or is Canada of the view that the separate and distinguish language describes, in other words, the non-attribution requirement set out in Article 3.5 of the AD Agreement and Article 15.5 of the SCM Agreement that the injuries caused by these other factors must not be attributed to the dumped imports? If the former, could Canada please explain how it reconciles this view with Appellate Body statements that the AD Agreement does not prescribe the methodology by which an investigating authority must avoid attributing the injuries of other causal factors to dumped imports. 1. Canada is of the view that to comply with the non-attribution requirement of Article 3.5 of the Anti-Dumping Agreement and Article 15.5 of the SCM Agreement, an investigating authority must separate and distinguish the effects of other known causal factors from those of the dumped or subsidized imports. The separate and distinguish language used by the Appellate Body in such cases as United States Hot-Rolled Steel describes, in other words, the non-attribution requirement set out in Articles 3.5 and 15.5. 2. For example, the Appellate Body stated in United States Hot-Rolled Steel: In order that investigating authorities, applying Article 3.5, are able to ensure that the injurious effects of the other known factors are not attributed to dumped imports, they must appropriately assess the injurious effects of those other factors. Logically, such an assessment must involve separating and distinguishing the injurious effects of the other factors from the injurious effects of the dumped imports. If the injurious effects of the dumped imports are not appropriately separated and distinguished from the injurious effects of the other factors, the authorities will be unable to conclude that the injury they ascribe to dumped imports is actually caused by those imports, rather than by the other factors. Thus, in the absence of such separation and distinction of the different injurious effects, the investigating authorities would have no rational basis to conclude that the dumped imports are indeed causing the injury which, under the Anti-Dumping Agreement, justifies the imposition of anti-dumping duties. 3. The Anti-Dumping Agreement and the SCM Agreement do not prescribe any particular methodology for this non-attribution analysis. Nevertheless, as the Appellate Body has clarified, the requirement that an investigating authority examine any known factors other than subject imports and not attribute to the latter any injurious effects caused by the former, means that the authority must separate and distinguish the effects of other causal factors from the effects of subject imports. In other words, while the Agreements do not prescribe how to carry out the non-attribution requirement, they clearly impose an obligation to separate and distinguish the effects of all known causal factors from those attributed to subject imports. 4. In this dispute, the Commission failed to comply with the requirement to conduct a non-attribution analysis. In its threat analysis, the Commission did not identify, much less examine, any other known factor that could threaten injury to the domestic industry in addition to the subject imports. This failure is particularly striking given that in its present injury analysis, the Commission identified excess domestic supply as another known factor that contributed to injury during the period of investigation. Having neglected to even identify any other causal factor in its threat analysis, the Commission also did not separate and distinguish the injurious effects of those other factors from the alleged injurious effects of the dumped and subsidized imports. Indeed, the Commission explicitly rejected the requirement to do so as having no basis in U.S. domestic case law. Question 6. With respect to the analysis of events in the future which the US argues underlies the USITC determination of threat of injury, Canada appears to argue that the US failed to adequately explain the reasoning underlying its conclusions. For instance, the United States argues that the statements concerning the restraining effects of the SLA support the conclusion that imports will increase in the future. It might be argued that from these statements, it can be understood that in the absence of restraining effects, i.e., when the SLA is no longer in effect, imports will increase. Is Canada arguing that the failure to specify this latter aspect fatally undermines the USITCs analysis? Or would Canada agree that if the path of an investigating authoritys reasoning is discernible, even if not clearly stated in its determination, a reviewing Panel may accept that reasoning as adequate? 5. The Panel is correct that Canada contends that the Commission did not provide a reasoned and adequate explanation of its affirmative threat of injury determination, including its finding that subject imports would increase substantially. As Canada has explained in its prior submissions, panels and the Appellate Body have made clear that an investigating authority must explain how the facts as a whole support its determination, addressing factors that detract from as well as support its determination and explaining why the factors considered were deemed relevant. Therefore, the Commissions reasoning must be evident from its Final Determination and if the Panel is forced to speculate about the Commissions rationale, the Commissions explanation is not sufficient.  6. With regard to the effects of the SLA, provided as an example by the Panel in its question, the key problem with the Commissions analysis is not that it omitted from its Final Determination an explicit statement that without the alleged restraining effect of the SLA, imports would increase in the future. Rather, it is that the Commissions conclusion that the SLA appears to have had only some restraining effect does not rationally support its finding of a likely substantial increase in imports. The lack of any finding that the SLA had a significant or substantial restraining effect (and the Commissions discussion of price effects in its current injury determination shows that it understands the difference between some effect and a significant effect) is what renders unreasoned the Commissions reliance on this factor to support its finding that imports would increase substantially, even in absolute terms. 7. The unreasoned nature of the Commissions reliance on this factor and the other subsidiary factors on which the Commission relied for its volume finding was compounded by its failure to explain why a substantial increase in the absolute volume of subject imports threatened material injury without considering whether any such increase during a period of improving demand would translate into a significant increase in the relatively stable subject import market share that was such an important factor in the Commissions negative current injury determination. These evidentiary and logical lapses in the Commissions reasoning are not superficial deficiencies; they are structural ones, and cannot be salvaged by the United States ex post facto justifications. Question 7. Is it Canadas view that an examining authority must consider each of the Article3.4/Article15.4 factors in what it refers to as a predictive context? (Canadas answer to the Panels question number 9) Could Canada indicate what it would envision in this analysis? For instance, is it Canadas view that an investigative authority must predict the level of wages, employment, productivity, growth, etc. in the future, and assess whether these levels would support a finding of injury in the future, i.e., threat of injury? How would Canada respond to the argument that such an analysis would of necessity involve a fair degree of uncertainty and speculation? 8. Article 3.4 of the Anti-Dumping Agreement and Article 15.4 of the SCM Agreement require that the examination of the impact of the subject imports on the domestic industry shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry. 9. In the context of a threat of injury analysis, forecasts must be made to evaluate whether or how those factors and indices are likely to change in the future as a result of the impact of the subject imports and whether any projected changes will amount to material injury to the domestic industry. The precise quantitative level of these factors and indices in the future does not have to be established. What matters is that an investigating authority conduct a reasoned and adequate analysis concerning the likely impact of further dumped imports on the domestic industry. This was made clear by the panel in Mexico HFCS: SECOFI concluded that imports were likely to increase, based on the increases during the period of investigation, and the available capacity of the exporting producers, but there is no meaningful analysis, based on facts, concerning the likely impact of further dumped imports on the domestic industry in the final determination, e.g., whether such increased imports are likely to account for an increased share of the growing Mexican market, have an effect on production or sales of sugar, or affect the profits of the domestic producers, etc, in such a manner as to constitute material injury. 10. In this dispute, the Commission failed to conduct such an analysis and did not even attempt to make projections as to future changes in the relevant factors. Canada recognizes that a prediction of future events based on extrapolation of current data necessarily involves some uncertainty, but if a threat determination rests on conjecture or remote possibility, it does not comply with the requirements of Articles 3.7 and 15.7. 11. In addition, as noted by Canada in its prior submissions, although the Commission did refer to trends in the past with respect to Articles 3.4/15.4 factors, the Commission did not attribute those trends to any material impact of subject imports, nor did it explain how subject imports would affect those trends and produce material injury in the imminent future. The Commission did not identify any clearly foreseen and imminent change in circumstances under which the subject imports would have an injurious impact on the domestic industry in the future. Annex B-2 UNITED STATES' RESPONSES TO QUESTIONS FROM THE PANEL - SECOND MEETING (17 October 2003) Question 1: The United States appears to argue that there is no obligation for an investigating authority to explicitly identify a change of circumstances that would cause a threat of injury to ripen into actual material injury. Would the US disagree with the proposition that a reviewing panel must be able to determine, from the investigating authorities determination, what the investigating authority considered constituted the clearly foreseen and imminent change in circumstances which would create a situation in which dumping would cause injury? 1. The United States would agree that a reviewing panel should be able to discern from the investigating authoritys determination the clearly foreseen and imminent change in circumstances which would create a situation in which the dumped and subsidized imports would cause injury. The ITCs determinations in this case enable the Panel to do just that. The Commission provided a detailed explanation of how the totality of the evidence supported its conclusion, i.e., that there will be in the near future substantially increased importation of softwood lumber from Canada at dumped and subsidized prices which would cause injury. In doing so, the ITC addressed the facts and likely events demonstrating the progression or change in circumstances which would create a situation in which the dumped and subsidized imports would cause injury. We refer the Panel to paragraph 18 of the US second written submission for a demonstration of the progression or change in circumstances. The Commissions decisional path is reasonably discernible, and its determinations are consistent with all of the US obligations under the covered agreements. 2. Canada has alleged that there is an explicit obligation in Articles 3.7 and 15.7 to identify a change in circumstance that would cause a threat to ripen into actual injury. While the text provides a clear example of the change in circumstances as a sequence or accretion of events, it contains no requirement to explicitly identify a change in circumstances. In its closing statement at the second panel meeting, Canada seems to retreat from its assertion of a requirement to explicitly identify by now equating identify with a demonstration of a change in circumstance. Canada, however, questions [i]f there is any difference between identify and demonstrate, [and states that] it is not apparent to Canada." But, there is a clear difference between explicitly identifying a change in circumstance and addressing the facts and likely events demonstrating the progression or change in circumstances which would create a situation in which the dumped and subsidized imports would cause injury. The Commission provided a detailed analysis which demonstrates the progression or change in circumstances, and as such, its determinations are consistent with all US obligations under the covered agreements. Question 2: The United States observed, at paragraph 17 of its second oral statement, that "Canada's claims that the ITC found no present injurious effects" are erroneous. Is the Panel to understand from this that the United States asserts that the USITC found that there was some degree of injury to the domestic industry during the period of investigation but that such injury was not material? Or is the Panel to understand that the USITC found that there was no causal link between the subject imports and injurious effects to the industry? Or is the Panel to understand that the USITC found that other factors caused the injurious effects? If not, could the US please explain the basis of the negative determination in the present material injury context in light of the "injurious effects" found in the analysis? 3. In short, the ITCs subsidiary findings regarding present material injury recognized some adverse injurious effects to the domestic industry from subject imports, which clearly support the ITCs determination of the existence of a threat of material injury. As discussed below, the ITC found a causal link between the subject imports and injury to the domestic industry, but also found in its present injury analysis that an other factor contributed to the injury to the domestic industry. In particular, the Commission found that the excess supply, which resulted in substantial declines in prices in 2000 and declines in the financial performance of the domestic industry, was not only provided by subject imports but also by domestic production. 4. In conducting a present material injury analysis, the investigating authority is required to consider the evidence and factors regarding the volume of imports, the price effects of imports and their impact on the state of the domestic industry. This analysis generally follows an order: first, consideration of whether the volume or market share of imports is significant; second, consideration of whether the price effects of imports (i.e., either through price undercutting or price suppression or depression) are significant; and third, consideration of whether subject imports have had an adverse impact on the domestic industry by evaluating all relevant economic factors and indices having a bearing on the state of the domestic industry and examining whether there is a causal relationship between the dumped and subsidized imports and injury to the domestic industry. 5. In this case, the ITC found, based on the facts as a whole, that the volume and market share of subject imports, accounting for 34 per cent of the US market, were already significant. This volume finding supported an affirmative present material injury finding, if combined with significant price and impact effects. While a finding that the volume of imports was significant was not by itself sufficient to support an affirmative present injury finding in these investigations, this volume finding is an integral factor in making an affirmative present material injury determination. 6. The Commission considered the evidence regarding price trends and found that prices declined substantially through the third and fourth quarters of 2000 to their lowest point in the 19992001 period." The Commission found that the substantial volume of subject imports had some effect on prices for the domestic like product during the period of investigation, albeit not significant effects. There was a particular fact that played a critical role in the Commissions conclusion of no significant present price effects: the excess supply in 2000 that resulted in price declines was due to both subject imports in addition to domestic production. The evidence showed that the declines in prices resulting from that excess supply had substantially affected the domestic industrys financial performance. The Commission concluded that while subject imports had adversely affected prices of domestic products, it could not find significant price effects, because the price declines were due to excess supply in 2000 from both Canadian exports and domestic product, and Canadian export market share had been relatively stable. 7. The Commissions finding that subject imports had some price effects and its reasoning for why such effects were not significant is set forth in the last three sentences of the Views of the Commission (ITC Report at page 35). The Commission stated as follows: The evidence indicates that both subject imports and the domestic producers contributed to the excess supply, and thus the declining prices. We conclude that subject imports had some effect on prices for the domestic like product during the period of investigation, in particular due to their large share of the market. However, particularly in light of relatively stable market share maintained by subject imports over the period of investigation, we cannot conclude from this record that the subject imports had a significant price effect during the period of investigation. 8. The Commission assessed the condition of the domestic industry and found that it is vulnerable to injury in light of declines in its performance over the period of investigation, particularly its financial performance." In brief, the record reflects that many performance indicators declined significantly from 1999 to 2000, and then declined slightly or stabilized from 2000 to 2001. With respect to the domestic industrys financial performance in particular, the evidence also generally shows declines during the period of investigation, with a dramatic drop from 1999 to 2000, as prices declined. The Commission found that the deterioration in the condition of the domestic industry during the period of investigation is largely the result of substantial declines in price. 9. In making its negative present material injury finding, the Commission summarized the impact of the subject imports on the domestic industry as follows: In light of our finding that subject imports have not had a significant price effect, and the small increase in their market share, we conclude that subject imports did not have a significant impact on the domestic industry, i.e., they had not caused material injury. 10. Moreover, there also was evidence in the record considered by the Commission in its analysis that foreshadowed the existence of threat of material injury. While the ITC recognized that the market share of subject imports was relatively stable at the significant 34 per cent level during the period of investigation, the Commission recognized that it had been higher prior to the imposition of the restraining effect of the Softwood Lumber Agreement (SLA). Thus, the ITC found that the SLA, which expired, had kept market share relatively stable. As discussed in the ITC Report, subject imports held a US market share of 35.7 per cent in 1995, the year prior to the SLA, and 35.9per cent in 1996, the year the SLA was imposed (on 29 May 1996). During the first full year under the SLA (1997), subject imports declined to a US market share of 34.3 per cent, the same market share held in 2001, with a range from 33.2 per cent to 34.6 per cent during the SLA period. Thus, the relatively stable market share during the SLA period does not negate the finding that the market share was significant. Rather it is an indicator of the SLAs restraining effect and supports an affirmative threat of injury finding. 11. Furthermore, there also was evidence at the end of the period of investigation which foreshadowed the existence of a threat of material injury. The ITC found that [p]rices during the first quarter of 2001 rose somewhat or remained near their levels in the fourth quarter of 2000, then significantly increased in mid2001 before declining again in the third and fourth quarters of 2001. Prices in the third and fourth quarters of 2001 had declined to levels as low as 2000. Subject imports also increased in the third quarter until the preliminary duties were imposed in August 2001. There also was evidence regarding excess supply which generally was considered the cause for the substantial price declines in 2000. This time, however, the evidence indicated that US producers had curbed their production, but that overproduction remained a problem in Canada. Therefore, the Commission reasonably found that the additional subject imports, which it concluded were likely, would further increase the excess supply in the market, putting further downward pressure on prices. Such evidence supports the ITCs findings of the existence of a threat of material injury. Question 3: The Panel understands the United States to be arguing that the situation of the US lumber market in the imminent future is expected to be much like the situation during the period of investigation strong, and even improving demand, significant level of subject imports, and increases in those imports, continuing oversupply in the market, and consequent negative price effects. However, the Panel understands the United States to contend that, unlike during the period of investigation, domestic producers will not contribute to the oversupply in the imminent future, and therefore the negative price effects will be attributable to oversupply of Canadian lumber. Is the Panel's understanding of the theory of the United States correct? Could the United States please indicate where in the determination this theory for the future is set forth? Could the United States please indicate the evidence, other than or in addition to the Bank of America analyst's report quoted at footnote 217 of the USITC determination, that supports the view that unlike during the period of investigation, domestic producers will not contribute to the oversupply in the imminent future? 12. While the situation of the US lumber market in the imminent future is expected to have some similarities to the situation during the period of investigation, there are differences in addition to the oversupply issue referenced by the Panel. In particular, the restraining effect of the Softwood Lumber Agreement (SLA) would no longer be in place. As discussed above, the ITC found that the SLA, which expired, had kept market share relatively stable. While the ITC had found that the volume and market share of subject imports were already significant and had increased even with the restraining effect of the SLA in place, the Commission also found that subject imports had increased substantially during periods without import restraints. For example, during the AprilAugust 2001 period, which was free from import restraints, subject imports had increased by 11.3 per cent compared to the same period in 2000. Moreover, the increases in imports under the SLA occurred in spite of some of these imports being subject to $50 and $100 fees. The Commission recognized that the significant quantities of imports subject to $100 fees under the SLA indicated that in the absence of the SLA they [Canadian producers] would have shipped more, given the near prohibitive level of the $100 fee." The Commission discussed its analysis regarding these factors on pages 4043 of the ITC Report. 13. As the Panel noted, the Commission recognized in its present material injury analysis that domestic overproduction had contributed to adverse price effects in 2000. The Panel is correct in understanding that the ITC found the evidence demonstrated that domestic production was no longer contributing to excess supply, while the continued oversupply by Canadian imports would likely have negative price effects in the imminent future. While the Commission found in its present material injury analysis that both subject imports and domestic production had been the source of the oversupply resulting in the substantial price declines in 2000, it also found that the evidence demonstrated that after 2000, domestic producers had curbed their production, but that overproduction remained a problem in Canada. The Commission cited to this evidence regarding events occurring toward the end of its period of investigation in its present material injury discussion. This evidence regarding supply in the latter part of the period of investigation clearly foreshadowed the existence of a threat of material injury by reason of the dumped and subsidized imports. 14. In addition to the evidence cited in footnote 217 of the ITC Report, the Commission considered domestic supply on pages 2425, 3435, 3738, and 4344 of the ITC Report and Canadian supply on pages 4041 of the ITC Report. Specifically, the evidence demonstrated that domestic production capacity was fairly level during the period of investigation, following a small but steady increase between 1995 and 1999, as apparent consumption increased. Domestic capacity utilization was 87.4 per cent in 2001. With the exception of a peak in 1999 at 92 per cent, it had consistently held this level from 1995 to 2001. In contrast, Canadian capacity utilization had declined in 2001 to 83.7per cent, a rate substantially lower than that reported for any other year in the 19952001 period. In spite of this decline in capacity utilization rates, Canadian producers projected slight increases in capacity, increases of 8.9 per cent in production, and a return of capacity utilization to 90.4 per cent in 2003. These facts concerning domestic and Canadian supply reinforce the ITCs affirmative threat determinations. Moreover, there also was other evidence regarding domestic supply in the record before the Commission. In particular, there was evidence regarding permanent mill closures, i.e., permanent reductions in capacity, in the United States and in Canada that showed a greater reduction in US production than Canadian production. Question 4: The United States asserted in its answer to the Panel's question 26, and in its second oral statement, that it was "important to understand that consideration and explanation of a factor in any section of the ITC Report does not limit its application to that section of the Report". Accepting that position for purposes of argument, could the US explain how a reviewing Panel is to understand the future impact of factors in the threat context if the analysis of those factors is only made in the context of a present injury analysis, with reference to historical data for the period of investigation? Is there not an obligation to explain the impact of those factors in the context of the analysis of threat of material injury in order for the Panel to be able to review the determination? Is it the view of the United States that an investigating authority need never consider the Article 3.4/Article 15.4 factors in a predictive context, that is, with respect to the impact of imports in the future on those, or other relevant factors? 15. The evaluation of whether dumped and subsidized imports have adversely impacted the domestic industry may involve: first, an evaluation of all relevant economic factors and indices having a bearing on the state of the domestic industry to determine the condition of the industry; and, second, an examination of whether the volume and price effects of the dumped and subsidized imports have impacted and caused injury to the domestic industry. 16. Where the investigating authority has considered the Article 3.4 and Article 15.4 factors regarding the condition of the domestic industry once, it is not required to undertake a separate, second evaluation, as part of an entirely distinct threat analysis. This does not mean that additional analysis appropriate for assessing whether further dumped and subsidized imports would have a consequent adverse impact on the domestic industry may not be required, depending on the facts. For example, in a case where the domestic industry is healthy and profitable during the period of investigation, it may be appropriate to provide a more detailed discussion of how its condition would likely be affected by further imminent dumped and subsidized imports. Such discussion would show how the condition would deteriorate and material injury would occur. On the other hand, in a case, as the one before this Panel, where the domestic industry is already in a vulnerable state and where the condition has deteriorated significantly during the period of investigation, resulting primarily from declines in prices caused by excess supply, the focus is on the likely substantial increases in imports and likely effects of declining prices, rather than whether the condition of the industry is deteriorating, as measured by the Articles 3.4 and 15.4 factors. 17. In this case, the Commission assessed the condition of the domestic industry and found that it is vulnerable to injury in light of declines in its performance over the period of investigation, particularly its financial performance." In brief, the record reflects that many performance indicators declined significantly from 1999 to 2000, and then declined slightly or stabilized from 2000 to 2001. With respect to the domestic industrys financial performance in particular, the evidence also generally shows declines during the period of investigation, with a dramatic drop from 1999 to 2000, as prices declined. 18. Moreover, the ITC considered the consequent impact of the likely substantial increases in imports and likely price effects. The evidence demonstrates that subject imports already at significant levels will continue to enter the US market at significant levels and are projected to increase substantially. The Commission found that the additional subject imports would increase the excess supply in the market, putting further downward pressure on prices. Prices at the end of the period of investigation, in the third and fourth quarters of 2001, had substantially declined to levels as low as they had been in 2000. Evidence regarding likely excess supply, which generally caused the substantial price declines in 2000 that led to the deterioration in the condition of the domestic industry, indicated that US producers had curbed their production, but that overproduction remains a problem in Canada. The Commission reasonably found that subject imports were likely to increase substantially and were entering at prices that are likely to have a significant depressing or suppressing effect on domestic prices, are likely to increase demand for further imports, and thereby adversely impact the US industry. The ITCs findings support the existence of a threat of material injury caused by subject imports.  United States Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, Report of the Appellate Body, WT/DS184/AB/R, adopted 23 August 2001, para. 223 [emphasis added] (US Hot-Rolled Steel). The Appellate Body re-iterated the above interpretation in European Communities Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, Report of the Appellate Body, WT/DS219/AB/R, adopted 18 August 2003, para. 188.  The Commission had found in its present material injury analysis that excess domestic supply was an other known factor, Answers of the United States to the Panels Questions in Connection with the First Substantive Meeting, para. 31 n.50.  Softwood Lumber from Canada, Investigations Nos. 701-TA-414 and 731-TA-928 (Final), Publication 3509, May 2002, p. 31, n.195 (Commission Report). (Exhibit CDA-1)  See Oral Statement of Canada at the Second Substantive Meeting of the Panel, paras. 8-10; First Written Submission of Canada, paras. 47-51; Oral Statement of Canada at the First Substantive Meeting, para.16; Second Written Submission of Canada, paras. 25 and 45; Canadas Responses to the Questions From the Panel in Connection with the First Substantive Meeting, paras. 2, 18-19, 23 and 36.  The concept that the decisional path be reasonably discernible is not found in ϲʹ panel or Appellate Body jurisprudence. It is a concept introduced by the United States in discussing whether the investigating authoritys consideration or evaluation of factors must be explicit or implicit. See First Written Submission of the United States, paras. 3, 86 and 114; Second Written Submission of the United States, para. 1; Answers of the United States to the Panels Questions in Connection with the First Substantive Meeting, para.53.  Commission Report, p. 41 [emphasis added]. (Exhibit CDA-1)  Oral Statement of Canada at the Second Substantive Meeting of the Panel, paras. 14-32 (discussing the Commissions analysis of the six factors listed as supporting its volume finding).  Mexico Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States, Report of the Panel, WT/DS132/R, adopted 24 February 2000, para. 7.132 (Mexico HFCS). [emphasis added]  In this regard, in interpreting the requirement that a threat determination under the Agreement on Safeguards be based upon facts and not on conjecture, the Appellate Body stated at paragraph 136 of its report in United States Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, Report of the Appellate Body, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001: . . . Article4.1(b) requires that a "threat" determination be based on "facts" and not on "conjecture". As facts, by their very nature, pertain to the present and the past, the occurrence of future events can never be definitively proven by facts. There is, therefore, a tension between a future-oriented "threat" analysis, which, ultimately, calls for a degree of "conjecture" about the likelihood of a future event, and the need for a fact-based determination. Unavoidably, this tension must be resolved through the use of facts from the present and the past to justify the conclusion about the future, namely that serious injury is "clearly imminent". Thus, a fact-based evaluation, under Article 4.2(a) of the Agreement on Safeguards,must provide the basis for a projection that there is a high degree of likelihood of serious injury to the domestic industry in the very near future. [emphasis added] See also: First Written Submission of Canada, paras. 73-75.  See US Second Written Submission, para. 18.  See Canada Second Written Submission, para. 4; Canadas Response to Panel Question 9, para. 34; Canadas Opening Statement at the First Panel Meeting, paras. 35 and 45.  Article 3.7 of the Anti-Dumping Agreement and Article 15.7 of the SCM Agreement state that [t]he change in circumstances which would create a situation in which the dumping [subsidy] would cause injury must be clearly foreseen and imminent. The Anti-Dumping Agreement provides as an example of the change in circumstances that there is convincing reason to believe that there will be, in the near future, substantially increased importation of the product at dumped [or subsidized] prices. Article 3.7 and n. 10 of the Anti-Dumping Agreement.  Canadas Closing Statement at Second Panel Meeting, para. 3.  ITC Report at 32 (Nonetheless, this large volume of subject imports both in absolute terms and relative to consumption in the United States is significant.).  The simple fact is, imports accounting for a large share of the market generally will be able to affect prices in the market, and thus impact the condition of the domestic industry.  ITC Report at 34.  ITC Report at 35.  ITC Report at 37.  See ITC Report at 3738.  See ITC Report at 3839.  ITC Report at 36.  ITC Report at 36.  ITC Report at 32 (Imports of softwood lumber from Canada held a substantial share of the domestic market with fluctuations within a range of 2.7 percentage points over the last seven years, and subject imports 2001 market share (34.3 per cent) was lower than that in 1995 prior to the SLA (35.7 per cent).).  ITC Report at 32 and 4142; see also ITC Report at Table IV2.  ITC Report at Table IV2.  ITC Report at 34.  Official import statistics (USA25).  ITC Report at 4344.  See ITC Report at 42, n. 269. In fact, subject imports increased from the AprilDecember 2001 period by almost 5 per cent, even with the bonding requirements imposed resulting from the August 2001 preliminary CVD determination.  ITC Report at 41.  See US Opening Statement at Second Panel Meeting, para. 47. The Bank of America analysis cited by the ITC indicates that lumber overproduction may continue even after the lumber market has been vastly oversupplied, because it is not exclusively tied to the demand for lumber but rather, may also be tied to demand for byproducts, e.g., wood chips for pulp and paper manufacturing.  ITC Report at Table III6 and C1 (public data). Domestic producers based on public data reported production capacity of 39,800 mmbf in 1999, 40,100 mmbf in 2000, and 40,040 mmbf in 2001. Id. Domestic producers questionnaire responses reported production capacity of 22,847 mmbf in 1999, 24,233 mmbf in 2000, and 24,709 mmbf in 2001, although the industry coverage is not necessarily comparable to the public data. Id. at Table III7 and C1.  ITC Report at Tables III6 and C1 (public data). Domestic capacity utilization based on public data was 86.1 per cent in 1995, 87.6 per cent in 1996, 89.9 per cent in 1997, 88.5 per cent in 1998, 92.0 per cent in 1999, 89.7 per cent in 2000 and 87.4 per cent in 2001. Id. Domestic producers questionnaire responses reported similar capacity utilization rates: 92.8 per cent in 1999, 88.5 per cent in 2000, and 86.1 per cent in 2001. Id . at Tables III7 and C1.  ITC Report at Tables VII1 (public data). Canadian capacity utilization based on public data was 87.8 per cent in 1995, 87.7 per cent in 1996, 87.4 per cent in 1997, 87.3 per cent in 1998, 90.5 per cent in 1999, 88.9 per cent in 2000 and 83.7 per cent in 2001. Id. Canadian producers questionnaire responses reported similar capacity utilization rates: 90.3 per cent in 1999, 88.8 per cent in 2000, 84.4 per cent in 2001, and projections of 88.5 per cent in 2002 and 90.4 per cent in 2003. Id. at Table VII2.  ITC Report at Table VII2. The US market is very important to Canadian producers. Canadian producers rely on sales in the US market for about 65 per cent of their production and have incentives such as mandatory cut requirements to produce more softwood lumber and export it to the US market.  The parties disagreed about the reasons for the decline in the number of US mills, but the Commission found that the record reflected that at least some of the mill closures were due to conditions in the US market. ITC Report at 39 and n. 244. This evidence showed that during the period of investigation, the permanent closure of US mills accounted for a greater reduction in US production than the reduction in Canadian production from the permanent closure of the Canadian mills and that more US mills than Canadian mills permanently closed from August 2000 to December 2001. See, e.g., Random Lengths data compiled in Petitioners Prehearing Brief at Exhibits 38 and 54; CLTAs Posthearing Brief, Vol. 3 at Tables D and F; Spelter Mill Report, 2001; ITC Report at Table III2.  ITC Report at 37. The Commissions analysis of the vulnerable condition of the domestic industry is on pages 3639 of the ITC Report.  See ITC Report at 3738.  See ITC Report at 3839.  The Commissions assessment of the impact of future imports on the domestic industry is primarily on pages 43 and 44 of the ITC Report. 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