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Softwood Lumber
Frequently Asked Questions on the Softwood Lumber Agreement
- Why is this Agreement good for Canada?
- Why is an agreement better than litigation?
- When does the Agreement enter into force?
- How will the Government of Canada return deposits to companies after entry into force of the Agreement?
- How can companies participate in the deposit refund mechanism?
- Of the US$5.5 billion in duty refunds, US$1 billion is going to the U.S. What will be done with the US$1 billion going to the United States?
- What does the reference to "meritorious good works" mean?
- How will the US$450 million given to the United States under the Softwood Lumber Agreement for "meritorious initiative" be disbursed?
- What is the “special charge” on duties and interest owed by the U.S. Government?
- Why is there a termination clause in the Agreement?
- How does the Agreement improve on the agreement in principle released April 27?
- Can the provinces carry out future forest management policy reform?
- How has Canada addressed the specific concerns of independent lumber remanufacturers?
- How will quota be allocated for companies operating under Option B?
- How often may provinces switch from one export measures option to the other?
- What is the adjustment factor?
- Where can companies get more information on export charges?
Canada and the United States can now turn the page on this dispute and direct our full attention to building a stronger, more competitive North America.
Under the Agreement, U.S. countervailing and anti-dumping duty orders will be fully revoked.
The deal will end years of costly litigation and return more than US$4.4 billion dollars in duties to Canadian softwood producers.
The return of more than US$4.4 billion marks a significant infusion of capital for the industry and will benefit workers and communities.
A deposit refund mechanism has been developed that will allow Canadian companies to receive their share of duty deposits within 4-8 weeks of filling out and returning the necessary legal and administrative documents after entry into force of the Agreement.
The Agreement is designed to bring stability to an industry impaired by over 20 years of repeated trade actions initiated by U.S. industry.
For the next seven to nine years, when lumber prices are above $355 per thousand board feet, no border measure will be imposed.
Provinces may choose the option that best addresses their specific economic and commercial situations when lumber prices are at US$355 per thousand board feet or less and border measures are required.
Option A involves an export charge which increases in steps from 5% to 10% to 15% as the price of lumber falls to or below US$355, US$335 and US$315 per thousand board feet, respectively.
Option B combines, at the same price levels, export charges of 2.5%, 3% and 5%, with quotas.
Funds collected under either option will stay in Canada.
The Agreement contains a provision allowing provinces to seek an exit from the border measures based on a process and criteria to be determined by Canada and the United States.
The Agreement will provide for reduced export charges when other lumber-producing countries significantly increase their exports to the United States at Canada’s expense.
The Agreement establishes a range of consultative mechanisms that will enhance bi-national co-operation and the development of an integrated North American lumber industry.
Litigation is a lengthy and costly process and the outcome of any litigation is never certain.
In the absence of a negotiated settlement, litigation could continue into 2007 and beyond.
Even if Canada is ultimately successful with current litigation, without a negotiated settlement, nothing prevents the U.S. lumber lobby from launching further legal actions against imports of Canadian softwood lumber.
The Government has introduced legislation in Parliament to proceed with the implementation of Canada’s commitments under the Agreement.
- The Agreement is expected to enter into force on October 1, 2006.
How will the Government of Canada return deposits to companies after entry into force of the Agreement?
A mechanism has been developed that will allow Canadian companies to receive their share of the duty deposits considerably more quickly then they would have otherwise received the duties without the mechanism.
Under the mechanism, Canadian companies will sell their duty deposits to Export Development Canada (EDC), which in turn, will advance the funds to Canadian companies and U.S. interests.
Eligible companies should first register with EDC. Following the online registration, companies will be provided with access to a special documents webpage containing further information and agreements, including the Purchase and Sale Agreement that EDC will use to purchase their softwood duties and interest.
Companies should then provide EDC’s Softwood Lumber Customer Service Centre with a copy of the Administrative Details Form containing their company’s contact information and banking instructions.
E-mail: Softwood Lumber Customer Service Centre
Fax: 1-877-336-5464
Of the US$5.5 billion in duty refunds, US$1 billion is going to the U.S. What will be done with the US$1 billion going to the United States?
Of the amounts owed to U.S. interests under the commitments agreed to between Canada and the United States, US$500 million will be distributed to the members of the Coalition for Fair Lumber Imports, US$450 million will go to meritorious initiatives in the United States to be determined in consultation with Canada, and US$50 million will go to an initiative benefiting the North American lumber market.
The meritorious initiatives will be determined by the United States in consultation with Canada and shall relate to:
educational and charitable causes in timber-reliant communities;
low-income housing and disaster relief; or
educational and public-interest projects addressing:
forest management issues that affect timber-reliant communities, or
the sustainability of forests as sources of building materials, wildlife habitat, bio-energy, recreation, etc.
How will the US$450 million given to the United States under the Softwood Lumber Agreement for “meritorious initiatives” be disbursed?
The Agreement requires that US$450 million be used to advance three types of meritorious initiatives in the US, determined in consultation with Canada, including:
- assistance for timber-reliant communities;
- low-income housing and disaster relief and;
- promotion of sustainable forest management practices.
In order to ensure equity and fairness to all companies benefiting from the Agreement, it is the government’s intention to impose a special charge on all duty refunds of approximately 19 percent.
Companies that participate in the EDC deposit refund mechanism will be deemed to have met obligations under the charge (i.e. by already having directed EDC to pay 19 percent of their refunds to U.S. interests).
This charge would be payable to the Government of Canada no later than the end of the month following receipt of a refund from U.S. Customs.
Revenues from the special charge will be used to provide companies’ share of the US$1 billion, which must be provided to U.S. interests under the terms of the Agreement.
Termination clauses are standard features of international trade agreements.
Under international law, without a specific termination clause, a Party is able to terminate an agreement after giving twelve months’ notice.
Only Parties to the Agreement—the governments of Canada and the United States—can terminate the Agreement.
Termination of an international trade agreement is a serious act and Parties do not exercise such rights lightly.
Parties agree to international agreements because they represent a balanced set of concessions. Termination of an agreement deprives both Parties of the rights and obligations they carefully negotiated. It is therefore in the interests of both Canada and the United States to see the Agreement lasts its full seven-to-nine-year term.
At the request of the Canadian industry, this Agreement contains an important provision whereby the United States cannot initiate new trade action for 12 months should they terminate the Agreement, which will further ensure the longevity of the Agreement.
On the understanding that Canada signs and implements the Agreement, the United States agrees to a clarification of the termination notice period so that either Party may, at any time after the Agreement has been in effect for 18 months, terminate by providing six months’ notice (in place of the current one-month notice period after the Agreement has been in effect for 23 months).
The Agreement is fully consistent with the basic terms of the April 27 framework agreement and also contains a number of important improvements, notably:
anti-circumvention provisions that protect current provincial forest management policies and also contain a full exemption for British Columbia’s Market Pricing System. Provinces can continue to undertake forest management policy reforms, including updates and modifications to their systems, actions or programs for environmental protection, and provide compensation to First Nations to address claims.
a deposit refund mechanism has been developed that will allow Canadian companies to receive their share of duty deposits within 4-8 weeks of filling out and returning the necessary legal and administrative documents after entry into force of the Agreement;
a 12-month standstill on U.S. trade action in the event the United States terminates the Agreement.
Yes. Provinces may proceed with forest management policy reform so long as it does not serve to circumvent or offset the provisions of the Agreement.
In addition, Canada and the United States, with full participation of the provinces, will establish a process, within 18 months, to determine what policy reforms would have to be implemented by a province in order for it to qualify for an exemption from the border measures.
Under the terms of the Agreement, independent lumber remanufacturers will not pay an export charge on the value-added component of the products they produce.
Provincial governments must first decide whether they wish to operate under Option A (tax) or Option B (quota/tax).
For regions operating under Option B, the federal government will consider advice from provincial governments on how quota will be allocated within each region.
Quotas must be allocated in a manner that is fair, transparent and fully consistent with the Export and Import Permits Act.
- Provinces will have the option of selecting Option A or Option B every three years.
- Paragraph 14 of Annex 7D of the Softwood Lumber Agreement is often referred to as the adjustment factor. It is a technical provision which may affect the way certain export measures under the Agreement are calculated. For more information, please refer to the legal text of Annex 7D by reading the Softwood Lumber Agreement.
Exporters that already have export permits issued by Foreign Affairs and International Trade Canada will receive an information package directly from the Canada Revenue Agency with more details on this initiative.
To apply for an export permit, companies should refer to the Export and Import Controls Branch website of Foreign Affairs and International Trade Canada.
If further assistance is required, exporters can contact the Help Desk at 1-877-808-8838 or, in Ottawa, at 613-944-1265 or, alternatively, via e-mail at EICS Help Desk.
