Tribunal offers mixed decision on Canadian softwood lumber dispute

An arbitration tribunal agreed with the United States that Canada violated the Softwood Lumber Agreement by failing to properly adjust the quota volumes of Canada's eastern provinces in the first six months of 2007 to account for rapidly changing market conditions.

But the tribunal also found the western provinces exempt.

The SLA took effect on Oct. 12, 2006, ending 20 years of litigation between the United States and Canada. The United States has long held that Canada's aid to its softwood lumber industry allowed it to sell to the U.S. market at less than fair market value.

The SLA provides for binding arbitration through the LCIA (formerly the London Court of International Arbitration) to resolve disputes between the United States and Canada regarding interpretation and implementation of the agreement. Under the SLA, there is no appeal from the decision of the tribunal.

The United States argued that Canada breached the SLA by waiting until July 2007, instead of January 2007, to make downward adjustments for the eastern provinces and by failing to make any adjustments for British Columbia and Alberta.

The tribunal found that Canada is required to make a downward adjustment only to the export volume caps for the eastern provinces, but not for British Columbia and Alberta. The tribunal did agree with the United States that Canada needed to make these adjustments starting in January 2007.

The tribunal's decision regarding the calculation of the trigger volumes for the Western Canadian provinces is not consistent with the balance we negotiated under the SLA, said Gretchen Hamel, spokeswoman for the Office of the U.S. Trade Representative, in a statement Tuesday. While we remain committed to the long-term goal of market-based trade in lumber, we will be consulting with our stakeholders on options going forward.

Under the SLA, Canada agreed to impose export measures on Canadian exports of softwood lumber products to the United States. When the prevailing monthly price of lumber, determined by the agreement, is above $355 per 1,000 board feet, Canadian lumber exports are unrestricted. When prices are at or below $355 per 1,000 board feet, each Canadian exporting region has chosen to be subject to either an export tax with a soft volume cap or a lower export tax with hard volume cap or volume restraint. The measures become more stringent as the market price of lumber declines, the USTR explained.

Today, the prevailing monthly price of lumber is $243 per 1,000 board feet and Canada's western provinces are subject to the maximum export charge of 15 percent, while the eastern provinces face the most stringent volume restraints provided under the SLA, in addition to an export charge of 5 percent. 

 

Source: American Shipper