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Notices

Softwood Lumber Exports to the United States: 2008 Export Allocation Methodologies

Serial No. 154
Date: December 31, 2007

Table of Contents

  1. Background
  2. Purpose
  3. Quebec
  4. Ontario
  5. Manitoba
  6. Saskatchewan
  7. Border Measure Option – Election by Regions 2010
  8. Further Information

1. Background

The Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (the softwood lumber agreement) requires Canada to limit export quantities from Option B Regions (Quebec, Ontario, Manitoba and Saskatchewan). To implement this and other requirements, Canada has enacted the Softwood Lumber Products Export Charge Act, 2006 (SLPECA), including amendments of the Export and Import Permits Act (EIPA). The EIPA authorizes the Minister to establish the “Regional Quota Volume” (RQV) for Option B Regions, establish a method for allocating the RQV and allocate the RQV to eligible applicants. The Minister has made an Order that governs eligibility for monthly allocation to exporters in Option B Region.

Under the softwood lumber agreement, Regions had the opportunity in 2006 to elect between two border measures: Option A, an export charge; or Option B, an export charge at rates lower than under Option A, with volume restraints. These elections were communicated to the Government of Canada by the provincial governments. In 2006, Quebec, Ontario, Manitoba and Saskatchewan elected Option B. As a result, Softwood Lumber Products first manufactured in those provinces and exported to the United States are subject to an export allocation regime during 2008.

Export allocations may be issued to eligible applicants. Export allocation eligibility criteria have been established after consultation with the respective provinces.

Note: as explained in section 7 below, under the Agreement, effective January 1, 2010, (see Article VII:9 of the SLA) – A Region will have an opportunity to change the option that applies to its exports of softwood lumber to the United States.

Transfers of Export Allocations

Policy respecting the transferability of export allocations will be set out in a future Notice to Exporters. The notice will be available on the Foreign Affairs and International Trade Canada website.

2. Purpose

This Notice to Exporters provides an explanation of eligibility criteria respecting export allocations in 2008 for certain Softwood Lumber Products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan and exported to the United States.

The Allocation Method Order (2008) – Softwood Lumber Products, (AMO), an EIPA regulation that has effect from January 1, 2008, establishes the export allocation eligibility criteria for 2008. The AMO is authoritative and it is intended that the present Notice to Exporters will assist exporters by describing elements of Agreement implementation, including the AMO

An export allocation may be used only for obtaining a permit for export to the United States of certain softwood lumber products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan.

Coverage

This Notice applies only to those softwood lumber products included in Export Control List item 5104 that are exported to the United States during 2008.

Only companies that have provided a signed application may be eligible for an export allocation.

DURATION

This Notice will remain in effect until December 31, 2008.

3. Quebec

3.1 Definitions

“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.

“Historic Pool” means the portion of the RQV that is available to Primary Producers with export history.

“Primary Producer” means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

“Reference Period” means November 1, 2004 to October 31, 2007.

“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 softwood lumber agreement; 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).

“Remanufacturer” means a person who remanufactures – within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 – current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

“Reserve Pool” means the portion of the RQV that is available to Quebec Primary Producers with or without export history.

“Softwood Lumber Products” means the softwood lumber products first manufactured in Quebec that are included in Export Control List item 5104.

3.2 Export Allocation Methodology

  1. The RQV is allocated to Primary Producers and Remanufacturers of Softwood Lumber Products for each of twelve months in a year.

  2. Subject to paragraphs 3.2.13 to 3.2.16 the following paragraphs outline the steps for determining eligibility for export allocation.

  3. Primary Producers and Remanufacturers that exported Softwood Lumber Products to the United States during the Reference Period apply for allocation. Primary Producers request an export allocation from the Historic Pool or from the Reserve Pool. Remanufacturers may receive an export allocation only from the Historic Pool. The Government of Quebec will provide DFAIT with the Reserve Pool participants' production volume history.

  4. Primary Producers that did not export Softwood Lumber Products to the United States during the Reference Period are eligible for an export allocation from the Reserve Pool.

  5. Firstly, calculate the volume of exports during the Reference Period for each eligible applicant and express this as the individual applicant's share.

  6. Secondly, determine the portion of the Quebec RQV that is to be allocated to Remanufacturers based on individual shares calculated in paragraph 5. Calculate an individual Remanufacturers share by multiplying this result by the RQV.

  7. Thirdly, calculate the Historic Pool, as follows:

    • Divide the sum of all primary producers' exports calculated in paragraph 5 by the sum of all applicants' exports; and
    • Multiply this result by 94% to establish the Historic Pool.
  8. Fourthly, determine the Historic Pool share that is to be allocated to individual Primary Producers by dividing the individual company's export volume during the reference period by the total export volume of Historic Pool participants multiplied by the total Historic Pool portion of the RQV.

  9. Fifthly, calculate an individual primary producers' allocation by multiplying their share of the Historic Pool by the RQV. Any unallocated quantity remaining in the Reserve Pool will be allocated to Historic Pool participants.

  10. Sixthly, calculate the Reserve Pool, as follows:

    • Divide the sum of all primary producers' exports calculated in paragraph 5 by the sum of all applicants' exports; and
    • Multiply this result by 6% to establish the Reserve Pool.
  11. Seventhly, determine the Reserve Pool share that is to be allocated to individual Primary Producers, by dividing the individual company's production volume during the period January 1, 2004 to December 31, 2006, by the total production volume of Reserve Pool participants during the period January 1, 2004 to December 31, 2006 multiplied by the total Reserve Pool portion of the RQV.

  12. Finally, calculate an individual primary producer's allocation by multiplying their share of the Reserve Pool by the RQV.

  13. For Reserve Pool participants, the volume allocated to an individual applicant will not exceed 40% of the applicant's average monthly lumber production during the period January 1, 2004 and December 31, 2006. The residual volume will be allocated to Primary Producer participants in the Historic Pool.

  14. Reserve Pool applicants that do not achieve 50% utilization of their export allocations during 2008, generally entailing exports to the United States and transfer with lumber, will not be entitled to export allocations in future years.

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

  16. Holders of export allocations may carry-forward and/or carry-back up to 12% of their monthly export allocation.

  17. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

4. 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.

“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 current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

“Reference Period” means January 1, 2007 through October 31, 2007.

“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 softwood lumber agreement; 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 remanufactures – within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 – current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

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

4.2 Export Allocation Methodology:

  1. The RQV is allocated to Primary Producers and Remanufacturers of Softwood Lumber Products for each of twelve months in a year for which export measures apply.

  2. Subject to paragraphs 4.2.7 and 4.2.8 the following paragraphs outline the steps for determining eligibility for export allocation.

  3. Firstly calculate exports of Softwood Lumber Products during the Reference Period by remanufacturers and Primary Producers.

  4. Secondly calculate exports during the Reference Period expressed as a percentage of the total volume exports by all eligible Primary Producers and Remanufacturers.

  5. Finally, allocate the Base Pool RQV to Primary Producers and Remanufacturers based on the shares calculated above.

  6. In future, a Temporary Pool may be established from under-utilized export allocations that may become available. “Temporary Pool” means a portion of the RQV that may be available for persons granted an opportunity to use Crown timber pursuant to Section 24 of the Crown Forest Sustainability Act, R.S.O. 1994.

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

  8. Holders of export allocations may carry-forward and/or carry-back up to 12% of its monthly export allocation.

  9. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

5. Manitoba

5.1 Definitions

“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 current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

“Reference Period” means November 1, 2006 through October 31, 2007.

“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 softwood lumber agreement; 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).

“Remanufacturer” means a person who remanufactures – within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 – current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

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

5.2 Export Allocation Methodology

  1. Subject to paragraphs 5.2.6 and 5.2.7 the following paragraphs outline the steps for determining eligibility for export allocation.

  2. The RQV is allocated for each of twelve months in a year to Primary Producers and Remanufacturers of Softwood Lumber Products.

  3. Firstly calculate exports of Softwood Lumber Products during the Reference Period by remanufacturers and Primary Producers.

  4. Secondly calculate exports during the Reference Period expressed as a percentage of the total volume exports by all eligible Primary Producers and Remanufacturers.

  5. Finally, allocate the Base Pool RQV to Primary Producers and Remanufacturers based on the shares calculated above.

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

  7. Holders of export allocations may carry-forward and/or carry-back up to 12% of its monthly export allocation.

  8. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

6. Saskatchewan

6.1 Definitions

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

“Primary Producer” means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

“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 softwood lumber agreement; 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).

“Remanufacturer” means a person who remanufactures – within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 – current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

“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. Subject to paragraphs 6.2.3 and 6.2.4 the following paragraphs outline the steps for determining eligibility for export allocation.

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

  3. Subject to the carry-forward/carry-back provisions described below, 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.

  4. 12% of the RQV may be carried-forward and/or carried-back.

  5. In the future, export allocations to Primary Producers and Remanufacturers may be based upon historic exports to the United States.

7. Border Measure Option – Election by Regions 2010

Under the softwood lumber agreement, each Region has the opportunity to review its election of the border measure that applies to exports of softwood lumber products to the United States from that Region effective January 1, 2010. During 2009, the Government of Canada will seek from provincial governments the election between Option A and Option B, as described in Section 1 – Background, for each Region subject to the border measure. This election of a border measure will result in the imposition of the elected border measure for the following three calendar years: 2010, 2011 and 2012. As a result, the nature of the border measure and the export allocations, if applicable, for any given province or Region may change considerably effective January 1, 2010.

8. Further Information

For further information with respect to the Canada – U.S. Softwood Lumber 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