U.S. Requests Consultations with Canada Under SLA 2006
U.S. Trade Representative Kirk has announced that the U.S. has requested consultations with Canada under the 2006 Softwood Lumber Agreement (SLA 2006) regarding the alleged unfair under-pricing of timber harvested from public lands in the Interior region of British Columbia.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Dispute Settlement Process Initiated by U.S. Request for Consultations
Requesting consultations under the SLA 2006 initiates the dispute settlement process and provides an opportunity for the U.S. and Canada to exchange views and attempt to resolve their differences. If the matter is not resolved during consultations, either the U.S. or Canada may request arbitration.1 USTR Kirk noted that the U.S. and Canada have been engaged in discussions regarding this matter for months, but those discussions have so far been unsuccessful.
U.S. Alleges BC is Circumventing SLA 2006 by Under-Pricing Lumber
The U.S. is seeking consultations over apparent under-pricing of timber in British Columbia’s Interior. USTR states that it appears that British Columbia is providing to softwood lumber producers a low-cost input for their products and circumventing the export measures provided for in the SLA 2006.
“Grade 4” lumber has a fixed low price. The SLA 2006 “grandfathers” British Columbia’s timber pricing system as it existed on July 1, 2006. Under the grandfathered system, timber harvested from public lands in the Interior region of British Columbia meeting the definition of “Grade 4” is priced at a fixed rate of 25 cents per cubic meter, while timber meeting the definitions of “Grade 1” or “Grade 2” is priced at a variable rate, which can in no case be lower than 25 cents per cubic meter, and often has been significantly higher.
Such lumber has increased dramatically. The share of timber harvested from public lands in the Interior region of British Columbia and provided as “Grade 4” (or otherwise priced at 25 cents per cubic meter) has increased dramatically since the SLA 2006 entered into force. This increase does not appear to be justified under the grandfathered BC provincial timber pricing system, even when known factors affecting timber quality in BC (such as the mountain pine beetle) are taken fully into consideration.
U.S. has Brought Two Other Disputes under SLA 2006 Against Canada
The SLA 2006 entered into force on October 12, 2006. Since then, the U.S. has brought two disputes under the SLA to ensure proper implementation of the Agreement.
First dispute resulted in higher export duty. In the first dispute, a tribunal found that Canada failed to calculate quotas properly during the first six months of 2007 and found that Canada should impose an additional CN $68.26M in export duties on softwood lumber as compensation. The U.S. recently agreed to transfer the collection of export duties over to Canada. (See ITT's Online Archives or 08/30/10 news, 10083011, for BP summary of USTR modifying the HTS to reflect Canada's collection of the duties, etc.)
Second dispute on provinces’ programs ongoing. The second dispute is ongoing and concerns Quebec and Ontario’s provincial programs that appear to provide subsidies in circumvention of the SLA. (See ITT’s Online Archives or 01/23/08 news, 08012305, for BP summary.)
1Under the SLA 2006, consultations are to be held within 20 days. If the matter is not resolved within 40 days of the request for consultations, either party may refer the matter to arbitration.
(See ITT’s Online Archives or 08/19/10 news, 10081918, for BP summary of the Senate Finance Chairman calling for Kirk to initiate consultations with Canada regarding the circumvention of the SLA 2006.)