Notices to Exporters

Softwood Lumber Exports to the United States - Policy Respecting the Transfer of Export Allocations

Serial No. 158
Date: May 20, 2008

Table of Contents

1.0 Purpose

The purpose of this Notice is to provide information to allocation holders and exporters with respect to transfers of export allocations for softwood lumber products exported to the United States commencing May 20, 2008.

2.0 Duration

This Notice is effective from May 20, 2008 and shall remain valid until further notice.

3.0 Authority

Products covered by this notice were added to the Export Control List (Group 5) of the Export and Import Permits Act (EIPA) in order to implement and satisfy the conditions of the Softwood Lumber Agreement, 2006.

4.0 Definitions

Terms such as "current softwood lumber products" and "former softwood lumber products" are as defined in the Allocation Method Order – Softwood Lumber Products, in force as of the date of a transfer.

"Agreement" means the Canada-United States Softwood Lumber Agreement, 2006.

"Allocation Holder" means a person that has been assigned a specified softwood lumber export allocation.

"EICB" means the Export and Import Controls Bureau of Foreign Affairs and International Trade Canada which is responsible for administering the softwood lumber export control program.

"Export allocation" means an export allocation 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.

"Region of First Manufacture" means the region (as defined under the Softwood Lumber Agreement 2006) 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 (for example, planing or kiln drying) or was transformed from one softwood lumber product into another such product (for example, a remanufactured product) in another region.

"Related person" means persons are related to each other if they are related persons within the meaning of subsections 251(2) to (6) of the Income Tax Act, except that;

  1. a reference in those subsections to "corporation" shall be read as a reference to "corporation or partnership"; and

  2. a reference in those subsections to "shares" or "shareholders" shall, in respect of a partnership, be read as a reference to "rights" or "partners", respectively.

"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 that are first manufactured in their respective region that are included in Export Control List.

"Transferee" means a person receiving the transfer of an export allocation.

"Transferor" means the person making the transfer, either as an allocation holder or as a recipient of transferred export allocation who further transfers the original transfer.

"Wholesaler" means a person that buys, sells, markets or distributes but does not produce softwood lumber products, and includes a person that contracts for services of a reload yard.

5.0 General Information

Under the Export and Import Permits Act, exporters of Softwood Lumber Products first manufactured in certain regions are subject to export allocations. Export allocations are required for softwood lumber exports from those regions which have opted for Option B under the Softwood Lumber Agreement 2006. An export allocation is required in order to obtain an export permit for exports to the United States of Softwood Lumber Products first manufactured in one of these regions. An export allocation may only be used to export Softwood Lumber Products from the region of first manufacture for which the allocation was made.

Normally, an allocation holder may transfer all or part of an export allocation during the allocation period (month) to other exporters of Softwood Lumber Products. The allocation holder may transfer an export allocation with or without Softwood Lumber Products (See Section 6.0 "Types of Transfers"). These types of transfer of an export allocation would enable the transferee to export Softwood Lumber Products from the region of first manufacture for which the allocation was made. The transfer of an export allocation may affect export allocation quantities in future years. (See Section 7.0, "Impact of Transfers on Future Years Export History Calculations")

A transferee can subsequently transfer the export allocation to another company. These transfers must comply with all notification requirements and other conditions relating to transfers of export allocations described in this Notice.

A corporate entity with multiple export allocations for its ' different corporate entities in the same region may transfer its ' allocations among these entities. A corporate entity with multiple export allocations for different corporate entities in the same region may also consolidate its ' allocations. Consolidation of allocations will normally be permitted upon written request to the Bureau. Upon approval, the EICB may consolidate a corporate entity 's export allocations into one or more EICB account(s) for the corporate entity at the start of the next allocation period (month).

The Government of Canada will not enforce the provisions of private commercial or contractual arrangements that may be associated with a transfer. The Government of Canada will, however, conduct verifications relating to the transfer of an export allocation.

Proposed transfers that meet the requirements set out in this notice will normally be approved upon request. The Minister may, at any time, approve, refuse, suspend, cancel or amend an export allocation, or a transfer of export allocation.

6.0 Types of Transfers

There are 3 types of transfers available to allocation holders. These are described under Sections 6.1, 6.2 and 6.3.

6.1 Transfer of an Export Allocation with Lumber:

Transfer of an export allocation with lumber to a transferee, must be associated with an equivalent or greater quantity of the transferor 's softwood lumber products in the region of first manufacture from which the allocation is being transferred.

Example #1 – Company X is a Quebec primary producer who transfers with lumber a Quebec export allocation to Company Y. Lumber from company X, first manufactured in Quebec, must be associated with this transfer.

Example #2 – Company X is a Manitoba remanufacturer who holds an Ontario export allocation; Company X transfers a quantity of his Ontario export allocation with lumber to Company Z. Lumber from company X, first manufactured in Ontario, must be associated with this transfer.

6.2 Transfer of an Export Allocation without Lumber:

A transfer of an export allocation to a transferee may be made without lumber. The softwood lumber product exported as a result of the transferred allocation must originate from the region of first manufacture from which the allocation is being transferred. Section 7.0 describes the effect on export allocation quantities in future years resulting from these transfers.

Example – Company X is an Ontario export allocation holder. Company X transfers without lumber a quantity of their Ontario export allocation to Company Y who is a Quebec primary producer. Company Y must export the lumber first manufactured in Ontario associated with the transfer.

6.3 Transfer of an Export Allocation without Lumber (15%):

A transfer of an export allocation to a transferee may be made without lumber. The softwood lumber products exported as a result of the transferred allocation must originate from the region of first manufacture from which the allocation was transferred. For this type of transfer, companies may only transfer 15% of their original allocation for the period (month). Section 7.0 describes the effect on export allocation quantities in future years resulting from these transfers.

7.0 Impact of Transfers on Future Years Export Allocation Calculations

7.1 Export allocations issued to companies in future years may take into account transfers of export allocation during the respective reference period as described in the current Allocation Method Order – Softwood Lumber Products. The impact of transfers on export allocations in future years will be dependent on the type of transfer, the associated quantity and/or the quantity of exports. In calculating future years export allocation, once a transfer is credited to a transferor or transferee, it can not be credited as a result of subsequent transfers.

7.2 Transfers with Lumber: For the purpose of calculating a company 's export allocation in future years, transfers with lumber may be credited to the transferor in the amount of the transfer, provided that the transferor is the original allocation holder and that all other conditions set out in this Notice are met.

  1. Transfers with lumber to a related producer, remanufacturer or wholesaler are considered, for the purposes of this Notice, to be part of a company 's original allocation, and may not be credited to the transferor.

  2. Any subsequent transfers, with or without lumber, by the transferee, who received the first transfer with lumber from an unrelated company, may not be credited to the transferor or the transferee.

  3. Any subsequent transfers, with or without lumber, by the transferee, who received the first transfer without lumber from a related company, may be credited as per Section 7.2

7.3 Transfers without Lumber (15%): For the purpose of calculating a company 's export allocation in future years, transfers without lumber of up to 15% of the transferor 's original allocation for the period (month), may be credited to the transferor provided the transferor is the original allocation holder and all other conditions set out in this Notice are met.

  1. Transfers without lumber, within the 15% limit, to a related producer, remanufacturer or wholesaler are considered, for purposes of this Notice, to be part of a company 's original allocation.

  2. Any subsequent transfers, with or without lumber, by the transferee, who received the first transfer without lumber from an unrelated company, may not be credited to the transferor or the transferee.

  3. Any subsequent transfers, with or without lumber, by the transferee, who received the first transfer without lumber from a related company, may be credited as per Section 7.3.

7.4 Transfers without Lumber: For the purpose of calculating a company 's export allocation in future years, transfers without lumber of the transferor 's original allocation for the period (month) may be credited to the transferee, provided the transferee is not a wholesaler and the transfer received is subsequently used to export to the United States with the corresponding quantity of lumber.

  1. If the transfer without lumber under Section 7.4 is not subsequently used to export to the United States, then neither the transferee nor the transferor may receive credit for purposes of calculating export allocations in future years

  2. Any subsequent transfers, with lumber, by the transferee, who received the first transfer without lumber, as per Section 7.4, may be credited in the amount of the transfer, subject to other rules and conditions set out in this Notice.

  3. Any subsequent transfers without lumber, by the transferee, who received the first transfer without lumber as per Section 7.4 may be credited to the company receiving the subsequent transfer, in the amount of the transfer, subject to other rules and conditions set out in this Notice.

7.5 All transfers with and without lumber may be subject to verification by the EICB. Please note that section 10.3(1) of the EIPA requires that every person who applies for any authorized transaction under the Act shall keep all records that are necessary to determine whether they have complied with this Act. Furthermore the EIPA requires that every person required to keep records under this act shall retain them until the expiry of six years after the end of the year to which they relate or for any other period that may be prescribed by regulation. Should verification reveal that transfers without lumber to a remanufacturer or primary producer are used for purposes other than to export softwood lumber products; the Minister may take this into account when deciding a company 's export allocation in future years.

The rules governing the calculation of export allocation in future years may vary by Region. For more information on region-specific Allocation Method Orders, see the most recent Notice to Exporters regarding Export Allocation Methodologies which is available on the DFAIT website.

8.0 Further Information

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)
Export and Import Controls Bureau
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2Hot 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

For further information with respect to the Softwood Lumber Agreement 2006, please contact:Softwood Lumber Division (TNS)

Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2Hot Line 613-944-2167
Facsimile 613-944-1452
E-mail address: softwood.boisdoeuvre@international.gc.ca
Web Page: Softwood Lumber