Determinations Under Section 304 of the Trade Act of 1974 With Respect to Certain Canadian Practices Affecting Periodicals

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. 301-102]

Determinations Under Section 304 of the Trade Act of 1974 With

Respect to Certain Canadian Practices Affecting Periodicals

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of determinations, termination and monitoring.

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SUMMARY: The United States Trade Representative (USTR) has determined

pursuant to section 304(a)(1)(A)(ii) of the Trade Act of 1974 (19

U.S.C. 2414(a)(1)(A)(ii)) (``the Trade Act'') that certain acts,

policies and practices of the Government of Canada that restrict or

prohibit imports of certain periodicals into Canada and apply

discriminatory treatment to certain imported periodicals violates, or

otherwise denies benefits to which the United States is entitled to

under, the General Agreement on Tariffs and Trade (GATT) 1994. This

determination is based on the report of a dispute settlement panel

convened under the World Trade Organization (WTO), at the request of

the United States, to examine the Canadian measures at issue. That

report, as modified by a report of the WTO Appellate Body, and adopted

by the WTO Dispute Settlement Body (DSB), found four Canadian measures

affecting periodicals to be inconsistent with Canada's obligations

under GATT 1994.

Following the adopting of this report by the DSB, Canada submitted

a letter to the DSB announcing its commitment to meet its obligations

under the WTO with regard to this matter and comply with the panel and

Appellate Body reports within a reasonable period of time. Thus,

pursuant to section 304(a)(1)(B) of the Trade Act, the USTR has

determined that, by making this commitment, Canada is taking

satisfactory measures to grant the rights of the United States under

the GATT. Therefore, the USTR will not take action under section 301 of

the Trade Act at this time and has terminated this investigation, but

will monitor under section 306 of the Trade Act Canada's implementation

of this commitment.

EFFECTIVE DATE: September 11, 1997.

ADDRESSES: 600 17th Street, NW., Washington, DC 20508.

FOR FURTHER INFORMATION CONTACT:

William Kane, Associate General Counsel, (202) 395-6800; or Megan

Waters, Director for Canadian Affairs, (202) 395-3412.

SUPPLEMENTARY INFORMATION: On March 11, 1996, the United States Trade

Representative initiated an investigation under section 302(b)(1) of

the Trade Act of 1974 (``the Trade Act'') regarding certain measures

adopted by the Government of Canada affecting periodicals and requested

public comment on the issues raised in the investigation and the

determinations to be made under section 304 of the Trade Act. 61 FR

11067 (March 18, 1996).

[[Page 50652]]

These measures included, but were not limited to, the following: (1)

Tariff Code 9958, which prohibits the importation into Canada of

certain periodicals; (2) Part V.1 of the Excise Tax Act, as enacted by

Bill C-103 of December 15, 1995, which imposed an excise tax on certain

so-called ``split-run'' periodicals, and (3) application of two types

of discriminatory postal rates in favor of certain Canadian

periodicals. As required under section 303(a) of the Trade Act, the

USTR requested consultations with the Government of Canada under the

procedures of the WTO Understanding on Rules and Procedures Governing

the Settlement of Disputes (DSU).

Pursuant to Section 304(a)(1)(A) of the Trade Act, the USTR must

determine in this case whether any act, policy or practice of the

Government of Canada violates, or otherwise denies benefits to which

the United States is entitled to under, any trade agreement. If that

determination is affirmative, the USTR must take action under section

301 of the Trade Act, subject to the specific direction of the

President, if any, unless, inter alia, the United States finds that the

foreign country is taking satisfactory measures to grant the rights of

the United States under the trade agreement.

Reasons for Determinations

(1) Canada's Acts, Policies and Practices

The WTO panel in this case circulated its report on March 14, 1997.

The panel found that the following three Canadian measures violated

Canada's obligations under the GATT: (1) Canada's import ban on certain

periodicals; (2) Canada's 80 percent excise tax on so-called ``split-

run'' periodicals, and (3) Canada's discriminatory ``commercial''

postal rates. Canada appealed the WTO panel's finding regarding the 80

percent excise tax, and the United States cross-appealed the panel's

conclusion that a fourth Canadian measure--Canada's discriminatory

``funded'' postal rates--were a subsidy exempt from GATT national

treatment requirements. The Appellate Body upheld the WTO panel's

findings on the excise tax, but reversed the panel's finding (agreeing

with the United States) regarding Canada's ``funded'' postal rates. The

DSB adopted the WTO panel and Appellate Body reports on July 30, 1997.

Thus, based on the results of the WTO dispute settlement proceedings,

the public comments received and appropriate consultations, the USTR

has determined pursuant to section 304(a)(1)(A)(ii) of the Trade Act

that certain acts, policies and practices of the Government of Canada

violate, or otherwise deny benefits to which the United States is

entitled to under, GATT 1994.

(2) U.S. Action

Upon affirmative determination of the denial of rights under a

trade agreement, the USTR must decide pursuant to section 304(a)(1)(B)

of the Trade Act to take action unless, inter alia, the USTR finds that

the foreign country is taking satisfactory measures to grant the rights

of the United States under the trade agreement. On August 29, 1997,

Canada submitted a letter to the DSB stating that it will meet its WTO

obligations and will comply with the WTO panel and Appellate Body

reports within a reasonable period of time. The USTR has determined

that, in light of Canada's letter of intention, Canada is taking

satisfactory measures to grant the rights of the United States under

GATT. Thus, the USTR will not take action under section 301 of the

Trade Act at this time and has determined this investigation. Pursuant

to section 306 of the Trade Act, the USTR will monitor Canada's

compliance with the WTO panel and Appellate Body report and will take

action under section 304(a) of the Trade Act if Canada does not come

into compliance.

Irving A. Williamson,

Chairman, Section 301 Committee.

[FR Doc. 97-25586 Filed 9-25-97; 8:45 am]

BILLING CODE 3190-01-M