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Notices

Softwood Lumber Exports to the United States: Export Allocation Methodologies

Serial No. 147
Date: January 31, 2007

Table of Contents

Background

The Canada-U.S. Softwood Lumber Agreement 2006 (the Agreement) provides for the making of export allocations to exporters of certain softwood lumber products to the United States, pursuant to the Softwood Lumber Products Export Charge Act, 2006. Exports of softwood lumber first manufactured in the provinces of Quebec, Ontario, Manitoba and Saskatchewan and exported to the United States will be subject to an export control regime.

Export allocations may be issued to eligible applicants. Export allocation eligibility criteria have been established after consultation with the respective provinces. The present Notice to Exporters provides an explanation of eligibility criteria respecting export allocations for certain Softwood Lumber Products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan.
Regulations, namely Allocation Method Orders with effect from January 1, 2007, will include the export allocation eligibility criteria.

Purpose

The purpose of this Notice is to advise exporters of softwood lumber to the United States of the methodologies that were used in making export allocations effective January 1, 2007.

An export allocation may be used only for purposes of obtaining an export permit for shipments to the United States of certain Softwood Lumber Products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan as designated in the export allocation.

Quebec

3.1 Definitions

“Regional Quota Volume' or “RQV' means the quantity of softwood lumber products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the Export and Import Permits Act (EIPA), and consistent with the Canada-United States Softwood Lumber Agreement 2006; in particular 4.86% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

“Historic Pool' means the portion of the RQV that is available to remanufacturers and primary producers that exported softwood lumber products, with export permits, during the period April 1, 2001 to December 31, 2005.

“Reserve Pool' means the portion of the RQV that is available to primary producers with or without export history.

“Primary Producer' means a person who produces softwood lumber products from softwood logs.

“Remanufacturer' means a person who produces softwood lumber products from lumber.

“Softwood Lumber Products' means the softwood lumber products first manufactured in Quebec that are included in the Export Control List.

“Force Majeure' means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

3.2 Export Allocation Methodology

1. The RQV is allocated for each of twelve months in a year to primary producers and remanufacturers of Softwood Lumber Products.

2. For 2007, the first step entails identification by primary producers that exported with export permits during the period April 1, 2001 to December 31, 2005 of their preference to participate in either the Historic Pool or a Reserve Pool. Primary producers that are not eligible for allocations from the Historic Pool are eligible for allocations from the Reserve Pool.

3. The second step is to calculate proportions for primary producers and remanufacturers based on their exports to the United States during the period April 1, 2001 to December 31, 2005, for which export permits were issued, relative to total exports of Softwood Lumber Products to the United States.

4. The third step is to allocate RQV to Remanufacturers based on 100% of the company proportion determined in paragraph 3.

5. The fourth step is to allocate RQV to Primary Producers that selected the Historic Pool based on 94% of the proportion determined in paragraph 3.

6. The fifth step is to establish the Reserve Pool by adding the following:

  • RQV minus quantities determined in paragraphs 4 and 5;
  • Quantities as determined in paragraph 3 for Primary Producers who select the Reserve Pool; and
  • Quantities as determined in paragraph 3 for which no applications were received from eligible applicants.

7. The sixth step is to allocate remaining RQV to primary producers that selected the Reserve Pool, based on the applicant's production during the period January 1, 2003 to December 31, 2005, divided by the total production of all Reserve Pool applicants during the period January 1, 2003 to December 31, 2005.

8. Reserve Pool allocations will be based on production data that applicants authorize the Government of Quebec to provide to the Government of Canada. The production data is subject to verification by the Department of Foreign Affairs and International Trade.

9. Commencing 2008, allocations from the Historic Pool will be based on average exports for the previous three years for which export data is available.

10. Allocations will be subject to adjustments for errors, corrections and omissions.

11. Historic and Reserve Pool allocation holders may carry-forward and/or carry-back up to 12% of their monthly export allocation.

12. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, this period will be excluded from consideration in future export allocations. Companies are required to inform the Department of Foreign Affairs and International Trade of a force majeure situation.

3.3 Transfer Policy

13. A transferred Quebec RQV allocation may be used to obtain an export permit only for the export of softwood lumber products first manufactured in Quebec.

14. Normally, an allocation holder may transfer an export allocation to an entity within the same corporate structure and within the same province.

15. Normally, an allocation holder may transfer an export allocation with Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the company transferring the export allocation.

16. Normally, an allocation holder may transfer an export allocation without Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the transferee, provided that the transferee is not a wholesaler.

17. A Reserve Pool allocation holder that transfers without Softwood Lumber Products more than 50% of its total annual (12 months) export allocation will not receive an export allocation the following year. In future years, the export allocation will remain in the Reserve Pool.

18. An allocation holder must submit a completed authorization form (see ARCHIVED - Annex I (PDF *, 81.7 KB)), to the Export and Import Controls Bureau, to authorize a custom broker to access the holder's export allocation balance and to transfer export allocations on the holder's behalf.

Ontario

4.1 Definitions:

“Base Pool' means RQV that is available to Remanufacturers and Primary Producers that exported Softwood Lumber Products, with export permits, during the Reference Period.

“Best twelve month period' means the consecutive twelve-month period within the Reference Period when the Primary Producer or Remanufacturer exported its largest quantity of Softwood Lumber Products to the United States.

“Export Allocation' means an allocation issued under paragraph 6.3(3)(b) of the Export and Import Permits Act (EIPA)

“Force Majeure' means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

“Primary Producer' means a person who produces Softwood Lumber Products from softwood saw logs.

“Reference Period' means April 1, 2001 through December 31, 2005.

“Regional Quota Volume' or “RQV' means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the EIPA, and consistent with the Canada-United States Softwood Lumber Agreement 2006; in particular 3.34% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

“Remanufacturer' means a person who produces Softwood Lumber Products from lumber.

“Softwood Lumber Products' means the softwood lumber products first manufactured in Ontario that are included in the Export Control List.

“Temporary Pool' means a portion of the RQV that may be available in the future for persons granted an opportunity to use Crown timber pursuant to Section 24 of the Crown Forest Sustainability Act, R.S.O. 1994.

4.2 Export Allocation Methodology:

1. The RQV is allocated for each of twelve months in a year to primary producers and remanufacturers of Softwood Lumber Products .

2. For 2007, the first step in the determination of the percentage share of RQV for a Primary Producer or a Remanufacturer is as follows:

a. calculate exports of Softwood Lumber Products during the “Best twelve-month period', expressed as a percentage of total exports of Softwood Lumber Products by all Primary Producers and Remanufacturers during their respective Best twelve month period; and

b. calculate exports of Softwood Lumber Products during the Reference Period, expressed as a percentage of total exports of Softwood Lumber Products by all Primary Producers and Remanufacturers.

3. The second step is to determine the larger of the percentage shares for each exporter in paragraph 2.

4. The third step is to calculate the sum of all percentage shares determined in paragraph 3.

5. The fourth step is to divide each exporter's percentage share determined in paragraph 3 by the sum of all shares determined in paragraph 4.

6. The fifth step is to allocate the Base Pool RQV to Primary Producers and Remanufacturers based on the shares calculated in paragraph 5.

7. For 2008, RQV allocations will be based on exports of Softwood Lumber Products for those months in 2007 for which export permit data are available.

8. Commencing in 2009, RQV allocations will be based on exports of Softwood Lumber Products for the previous twelve months for which export permit data are available.

9. It is anticipated that a Temporary Pool will be established in the future from under-utilized export allocations that may become available.

10. Export allocations will be subject to adjustments for errors, corrections, and omissions.

11. An export allocation holder may carry-forward and/or carry-back up to 12% of its monthly export allocation.

12. When a force majeure situation prevents an export allocation holder from exporting Softwood Lumber Products during a specified period, this period will be excluded from consideration in future export allocations. Companies are required to inform the Department of Foreign Affairs and International Trade of a force majeure situation.

4.3 Transfer Policy:

13. A transferred Ontario export allocation may be used to obtain an export permit only for the export of softwood lumber products first manufactured in Ontario.

14. Normally, an export allocation holder may transfer an export allocation within the same corporate structure.

15. Normally, an export allocation holder may transfer an export allocation with Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the company transferring the export allocation.

16. Normally, an export allocation holder may transfer an export allocation without Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the transferee, provided that the transferee is not a wholesaler.

17. An export allocation holder must submit a completed authorization form (see ARCHIVED - Annex I (PDF *, 81.7 KB)), to the Export and Import Controls Bureau, to authorize a custom broker to access the holder's export allocation balance and to transfer export allocations on the holder's behalf.

Manitoba

5.1 Definitions

“Regional Quota Volume' or “RQV' means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the Export and Import Permits Act (EIPA), and consistent with the Canada-United States Softwood Lumber Agreement 2006; in particular 0.31% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

“Force Majeure' means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

“Primary Producer' means a person who produces softwood lumber products from softwood logs.

“Remanufacturer' means a person who produces softwood lumber products from lumber.

“Softwood Lumber Products' means the softwood lumber products first manufactured in Manitoba that are included in the Export Control List.

“Reference Period' means April 1, 2001 through December 31, 2005.

5.2 Export Allocation Methodology

1. The RQV is allocated for each of twelve months in a year to primary producers and remanufacturers of Softwood Lumber Products.

2. For 2007, the first step entails calculation of exports of Softwood Lumber Products by a primary producer or remanufacturer's during the Reference Period, expressed as a share of total exports of Softwood Lumber Products during the Reference Period.

3. The second step is to allocate the RQV to primary producers and remanufacturers based on the shares calculated in paragraph 2.

4. Commencing 2008, export allocations will be based on exports of Softwood Lumber Products for the previous twelve months for which export permit data is available.

5. Allocations will be subject to adjustments for errors, corrections, and omissions.

6. An allocation holder may carry-forward and/or carry-back up to 12% of its monthly export allocation.

7. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, this period will be excluded from consideration in future export allocations. Companies are required to inform the Department of Foreign Affairs and International Trade of a force majeure situation.

5.3 Transfer Policy

A transferred Manitoba RQV allocation may be used to obtain an export permit only for the export of softwood lumber products first manufactured in Manitoba.

Normally, an allocation holder may transfer an export allocation within the same corporate structure.

Normally, an allocation holder may transfer an export allocation with Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the company transferring the export allocation.

Normally, an allocation holder may transfer an export allocation without Softwood Lumber Products. For the purpose of calculating export allocations in future years, exports arising from such transactions will be credited to the transferee, provided that the transferee is not a wholesaler.

An allocation holder must submit a completed authorization form (see ARCHIVED - Annex I (PDF *, 81.7 KB)), to the Export and Import Controls Bureau, to authorize a custom broker to access the holder's export allocation balance and to transfer export allocations on the holder's behalf.

Saskatchewan

6.1 Definitions

“Regional Quota Volume' or “RQV' means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the Export and Import Permits Act (EIPA), and consistent with the Canada-United States Softwood Lumber Agreement 2006; in particular 0.46% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

“Primary Producer' means a person who produces softwood lumber products from softwood logs.

“Remanufacturer' means a person who produces softwood lumber products from lumber.

“Softwood Lumber Products' means the softwood lumber products first manufactured in Saskatchewan that are included in the Export Control List.

6.2 Export Allocation Methodology

1. The RQV is allocated on a first-come, first-served basis to export permit applicants.

2. Subject to paragraph 6.3, export permits for exports of Softwood Lumber Products to the United States will be issued to applicants in a quantity that does not exceed the RQV.

3. 12% of the RQV may be carried-forward and/or carried-back.

4. In the future, export allocations to primary producers and remanufacturers may be based on average exports from April 1, 2001 to December 31, 2005 for which export data is available.

6.3 Transfer Policy

Transfers of export allocations will not occur until such time as company-specific export allocations are made. At that time, an allocation holder may be permitted to transfer an export allocation to an entity within the same corporate structure in the same province.

Further information

For further information with respect to the Agreement, please contact:

Softwood Lumber Division (TNS)
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2

Hot Line 613-944-2167
Facsimile 613-944-1452
E-mail address: softwood.boisdoeuvre@international.gc.ca
Web Page: Softwood Lumber

For further information with respect to the export controls on shipments of softwood lumber to the United States, please contact:

Softwood Lumber Controls Division (TIS)
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2

Hot Line 613-944-2168 or 1-877-808-8838
Facsimile 613-995-5137
E-mail address: softwood.boisdoeuvre@international.gc.ca
Web Page: Softwood Lumber


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