U.S. Requests Second Arbitration Under SLA 2006
The Office of the U.S. Trade Representative has issued an electronic notice stating that the U.S. has requested a second arbitration under the 2006 U.S.-Canada Softwood Lumber Agreement (SLA 2006), challenging Quebec and Ontario's provincial subsidy programs that appear to violate the terms of the SLA 2006.
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(In the first arbitration, which was initiated in August 2007, the U.S. is challenging Canada's implementation of the export measures under the SLA 2006, in particular the operation of the SLA 2006's surge mechanism and volume caps. A hearing was held in New York City on December 12, 2007, before a tribunal operating under the rules of the London Court of International Arbitration. The tribunal expects to issue a decision in that arbitration by the end of February 2008. See ITT's Online Archives or 08/13/07 news, 07081315, for BP summary of the U.S. initiation of this arbitration.)
U.S., Canada Have Been in Consultations Since April 2007
According to the USTR, the U.S. and Canada have been in consultations regarding the subsidy programs since April 2007; however, efforts to resolve these matters through consultation have not been successful. Therefore, the U.S. is taking the next procedural step and is initiating arbitration proceedings pursuant to the terms of the SLA 2006.
Quebec, Ontario Have Assistance Programs for Softwood Lumber Producers
The USTR states that Quebec and Ontario have put in place several assistance (subsidy) programs that provide grants or other benefits to softwood lumber producers that violate the SLA 2006's anti-circumvention provisions. These include a number of grant, loan, loan guarantee, and tax credit programs, as well as so-called "forest management" programs and programs that promote wood production.
Arbitral Tribunal to Issue its Award within Six Months of Appointment
The USTR explains that under the SLA 2006, after arbitration is requested, there is an approximate two-month process to select the arbitrators, and the arbitral tribunal is to issue its award within six months of its appointment.
U.S. Also Expresses Concern over Proposed Community Development Trust
On January 10, 2008, the Government of Canada announced its proposal to create a $1 billion Community Development Trust, including aid to Canada's forestry sector. In response to concerns in the U.S. about this announcement, USTR Susan Schwab sent a letter to Canadian Trade Minister David Emerson seeking Canada's assurance that any funds disbursed to Canada's forestry sector from the trust would be used in a manner consistent with Canada's obligations under the SLA 2006.
(See ITT's Online Archives or 09/14/06 and 10/18/06 news, 06091410 and 06101805, for BP summaries of the signing of SLA 2006 and its entry into force, respectively.
See ITT's Online Archives or 05/17/07 news, 07051715, for BP summary of U.S. Customs and Border Protection's (CBP's) updating of tariff numbers that may be subject to the SLA 2006 entry and export permit requirements, etc.
See ITT's Online Archives or 10/19/06 news, 06101925, for BP summary of CBP's interim rule establishing special entry requirements for Canada softwood lumber products. See ITT's Online Archives or 11/13/06 news, 06111307, for BP summary of CBP's most-recent updated implementation instructions for the SLA 2006.)
USTR electronic notice on the second arbitration request (dated 01/18/08) available via email by sending a request to documents@brokerpower.com
USTR statement regarding Schwab's letter being sent to Canada (dated 01/16/08) available at http://www.ustr.gov/Document_Library/Press_Releases/2008/January/Statement_from_USTR_Spokesman_Sean_Spicer_on_Softwood_Lumber_Agreement_Between_Canada_United_States.html
Press release on the new trust (dated 01/10/08) available at http://www.pm.gc.ca/eng/media.asp?id=1959
Overview of the trust (dated 01/10/08) available at http://www.pm.gc.ca/eng/media.asp?id=1960
BP Note
The SLA 2006 entered into force on October 12, 2006, replacing U.S. antidumping (AD) and countervailing (CV) duty orders on certain softwood lumber products from Canada with either: (1) a Canadian export tax, (2) a lowered Canadian export tax combined with limited export volumes, or (3) unrestricted trade, depending on market conditions.
Under the SLA 2006, Canada committed not to take any action that circumvents the SLA, including actions that reduce or offset the SLA 2006's export measures, such as providing new subsidies to producers or exporters of Canadian softwood lumber products.