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On April 2, 1996 it was announced that Canada and the United States had finalized an agreement in which the following commitments were made:
- The United States would not launch any trade actions on softwood lumber exports from Canada for the next 5 years (the Agreement expires on March 31, 2001).
- Canada would implement an export fee on all softwood lumber from British Columbia, Quebec, Ontario and Alberta in excess of 14.7 billion board feet, when exported to the U.S.
Manitoba, Saskatchewan and the Northwest Territories are unaffected by the agreement. The Maritime provinces and Newfoundland maintain their traditional exemption.
Following that announcement a plan was announced on September 10, 1996
to allocate, on a company basis, the export of softwood lumber to the United
States. The plan followed “extensive consultation” with both industry
and provincial stakeholders, which resulted in “considerable consensus.”
The plan allowed companies already established in the lumber market
to continue their traditional patterns of trade; it permitted some
change in a company’s share to provide for growth; and took a balanced
approach to meet the interests of the industry throughout the country.
The allocation system provided that producers based in B.C. would receive 59%; Quebec 23%; Ontario 10.3%; and Alberta 7.7%.The allocation was based on recent exports at the time of implementation and went to primary producers and re-manufacturers. While wholesalers were not given any direct allocation, the primary industry representatives provided written assurances that it would continue to use wholesalers in the provinces as distributors to the U.S. – in other words, to maintain “business as usual”.
The plan required the allocation to be reviewed annually and provided an adjustment mechanism to reflect changes in participating firms.
No export fee applied to 14.7 billion board feet per year originating in the named provinces. For exports above that level, fees of US$50 per thousand board feet for the first 650 million board feet, and US100 per thousand board feet for greater quantities would be assessed. These fees are subject to an annual review and, effective April 1, 1998 will be increased to US$52.09 and US$104.18 respectively. There was no cap placed on exports to the U.S.
Definitions
Coverage: Softwood lumber products first manufactured in B.C.; Alberta; Ontario; or Quebec that are exported to the U.S., irrespective of the province or territory of export. (Shipments of softwood lumber first manufactured in the territories, in other provinces, or in any other country, are not subject to this agreement; exporters are required to keep appropriate documentation on the origin of such shipments as U.S. Customs entry documents require the province of origin to be identified).
Softwood Lumber Products: This agreement covers articles classified under tariff items 4407.10.00; 4409.10.10; 4409.10.20; 4409.10.90 inclusive, of the Harmonized Tariff Schedule of the United States (1996).
Province of first manufacture: The province where the mill, at which the softwood lumber product was first manufactured into such a product, is situated, whether or not that product was further processed (such as preserving, planing, or kiln drying) or was transformed from one softwood lumber product into another such product in another province.
Primary producer/sawmiller: A Canadian incorporated company, or Canadian joint venture, Canadian partnership or Canadian proprietorship operating prior to December 31, 1995, that first manufactures softwood lumber (commonly known as “first-cut lumber”, “dimensional lumber”, “bulk lumber”).
Other definitions available if required: Re-manufacturer/value added manufacturer; Integrated producer; Wholesaler/distributor; Preserver; Board-foot measure (BFM); Affiliated company; Associated company; Subsidiary company.
Allocation Policy
The allocation is a national corporate-based system. Export levels attracting no fee (Established Base Levels) or attracting a fee of US$52.09 per thousand board feet (Lower Fee Base Levels), have been allocated to primary producers and re-manufacturers, including new entrants. The allocation process for new entrants is based on special criteria. Individual allocations are normally valid for one year at a time; there is no carry forward provision for unused quantities. The interim first-come, first-served allocation has been replaced with the full allocation process.
New Entrants
Based on input from industry representation in all four covered provinces, an amount of 628 million board feet was set aside for allocation to new entrants for the period October 1, 1996 to March 31, 1998. This comprised 294 million board feet from the fee-free Established Base Level, 184 million board feet of fee-free trigger price bonus allocation (applicable from April 1, 1996 to March 31, 1998 only) and 150 million board feet of the Lower Fee Base Level.
New entrants were defined as follows:
- New mills that began production in 1995 or 1996;
- Companies with “bricks and mortar” in the ground by April 1, 1996;
- Companies with verifiable investment commitments by April 1, 1996; and
- Companies that have undertaken major capital investments in new production capacity since January 1, 1995.
Exporters without an allocation
Exporters without an allocation may export unlimited quantities of covered softwood lumber products under the authority of permits issued against the Upper Fee Base of US$104.18 per thousand board feet. Alternatively, certain exporters (re-manufacturers and wholesalers) may arrange for transfers from holders of allocations; these will attract the applicable fees, either free or US$52.09 per thousand board feet.
Export Permits
Export permits are used to keep track of shipments within each of the categories (Established Base; Lower and Upper Fee Bases). Permits will be issued for all shipments of covered products. It is for the exporter to ascertain which base level will apply to a particular shipment. Compliance measures have been implemented and non-compliant exporters who fail to obtain an export permit will be issued appropriate assessments under the Upper Fee Base.
U.S. Customs Procedures
The key point in the process of exporting softwood lumber products, as far as the issuance of a Canadian export permit is concerned, is release. Goods released into the U.S. are counted against Canada’s overall exports. Once shipments are released therefore, the exporter has incurred a potential liability for fees under Canadian law if the Established Base has been exceeded.
Transferability of allocations
As briefly mentioned earlier, allocations are transferable. Allocation holders may provide transfer authorizations to re-manufacturers or wholesalers. The transferability of allocations is restricted and is not open to any other segment of the industry. This process was implemented on the advice of industry and is designed to facilitate “business as usual” for re-manufacturers and wholesalers.
National Advisory Committee
The National Advisory Committee on Softwood Lumber was formed in 1996. It has a mandate to provide the Minister for International Trade with advice on the allocation mechanism in general and, more specifically, to provide the Minister with advice and recommendations as to how the export level allocations should be distributed.
The committee consists of representatives of the primary, re-manufacturing, and wholesale industries as well as the provinces of Alberta, British Columbia, Ontario, and Quebec. In addition, representation is also included from various provincial Advisory Committees and national associations.
Permit Fees
At Russell A. Farrow Limited we have on-line access to the Export and Import Controls Bureau (EICB). Utilizing this privilege, we can obtain export permits for a nominal fee. A fee of CAD $9 is levied by the EICB for the aggregate number of export permits issued for each shipment based on a single U.S. Entry Number.
Further Information
This summary is intended to provide a reference to some of the critical
aspects of the Softwood Lumber Products Export Control Program. We
recommend an in-depth review of the various Notices to Exporters published
by the EICB prior to making any decision to export these goods to the United
States.
| Should you require further information, please contact John Brooks (519) 740 9335 ext.215 (Eastern Canada); Wendy Stayko (403) 423 5444 (Western Canada); or Valerie St. Dennis (Supervisor, Import Permits, Windsor, Ontario – (519) 966 6069 ext.230). The EICB may be contacted at: Telephone (613) 944 2167; or Fax (613) 944 2170. |
| Note: The information contained herein is not intended to provide legal or other professional advice. Readers are asked to contact Russell A. Farrow Limited for advice specific to their needs. |
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