U.S. Seeks SLA Arbitration with Canada on Under-Pricing of Certain Timber
U.S. Trade Representative Ron Kirk announced on January 18, 2011 that the U.S. is requesting arbitration with Canada under the 2006 Softwood Lumber Agreement (SLA) regarding the under-pricing of timber harvested from public lands in the Interior region of British Columbia.
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Disputes Increase in Low Cost “Grade 4” TimberSold to Canadian Producers
According to USTR, Canada is selling an increased amount of timber harvested from public lands in the Interior region of British Columbia for prices below those provided for under the timber pricing system grandfathered under the SLA.
The central issue involves the mis-assignment of public timber to the salvage “grade 4,” which British Columbia then sells to Canadian softwood lumber producers at the low fixed rate of 25 cents per cubic meter. The share of timber harvested from public lands in this region and provided as “grade 4” (or otherwise priced at 25 cents per cubic meter) has increased dramatically since the SLA entered into force.
USTR says that this increase is not justified under the British Columbia provincial timber pricing system recognized under the SLA, even when known factors affecting timber quality (such as damage from the mountain pine beetle) are fully taken into consideration.
Says Benefits Given to Canadian Producers Circumvent SLA
Canada agreed under the SLA to impose certain measures to affect the price of softwood lumber exports to the U.S. USTR states that by selling timber for prices below those provided for under the timber pricing system grandfathered under the SLA, Canada provides a benefit to Canadian softwood lumber producers in circumvention of the export measures provided for in the Agreement.
Requests Binding Arbitration as Oct 2010 Consultations Failed to Resolve Issue
The two countries held consultations in October 2010, but did not resolve the matter. As the U.S. believes its concerns have gone unaddressed by Canada, it is exercising its rights under the SLA to submit the matter to binding arbitration, as provided for under the SLA.1 (At USTR’s request, the U.S. Department of Justice will be filing the request and handling the arbitration.)
Marks Third Time U.S. Has Sought Arbitration Under SLA
This is the third time that the U.S. has sought arbitration under the SLA. USTR states that 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 second dispute is ongoing and concerns several Canadian provincial programs that provide subsidies in circumvention of the SLA.
(See ITT’s Online Archives or 09/30/09 and 03/02/09 news, 09093015 and 09030230, for BP summaries of the first arbitration. See ITT's Online Archives or 01/23/08 news, 08012305, for BP summary of USTR announcing the second arbitration challenging the provincial subsidy programs.)
1The SLA provides for binding arbitration to resolve differences between the U.S. and Canada regarding interpretation of the Agreement. Under the SLA, arbitration is conducted under the rules of the London Court of International Arbitration.
(See ITT’s Online Archives or 10/12/10 news, 10101206, for BP summary of the U.S. seeking consultations with Canada on this issue.
See ITT’s Online Archives or 08/19/10 news, 10081918, for BP summary of the Senate Finance Chairman calling for Kirk to initiate the consultations.)