USTR May Reduce or Remove 10% Canada Softwood Lumber Duty

The Office of the U.S. Trade Representative has issued a notice seeking comment on the possible modification or termination of its April 2009 imposition of a 10% additional duty on imports of softwood lumber from certain Canadian provinces, as Canada is taking steps to address the situation through the imposition of a 10% export charge.

Comments are due by June 14, 2010.

U.S. Imposed 10% Add’l Duties in April 2009 Due to Canadian Breach of SLA

Since April 2009, the U.S. has imposed 10% ad valorem duties on imports of softwood lumber products subject to the 2006 Softwood Lumber Agreement (SLA) from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan. These duties are set to remain in place until such time as the U.S. collects $54.8 million (or $68 million Canadian dollars).

The U.S. imposed these additional duties under Section 301 of the Trade Act because:

(1) An arbitral tribunal determined in March 2008 that Canada had breached its SLA obligations regarding the export measures it had agreed to impose on Canadian exports of softwood lumber products to the U.S.

(2) In February 2009, the tribunal issued a remedy award requiring Canada to collect an additional 10% export charge on softwood lumber shipments from the four provinces until CDN $68 million ($54.8 million) was collected.

(3) However, Canada did not collect the additional export charge and instead offered to directly pay the U.S. government a lesser amount of $36.66 million, which the USTR determined denied U.S. rights under the SLA.

(See ITT’s Online Archives or 04/08/09 and 09/30/09 news, 09040805 and 09093015, for BP summaries of the U.S. imposing the add’l duty and a second tribunal agreeing with the U.S. action.)

Canada Now Taking Steps to Adopt Contested 10% Export Charge

The Government of Canada, however, is now taking steps toward adopting its own measure to address Canada’s breach of the SLA, in the form of legislation requiring the collection of an additional 10% charge on exports from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan. If the proposed bill becomes law by receiving royal assent, it could become law as soon as mid-June 2010.

USTR May Modify/Terminate Duty, If Canadian Action Is Satisfactory

According to USTR, it is authorized to modify or terminate Section 301 actions such as these additional duties if a foreign country is taking satisfactory measures to grant the rights of the U.S. under a trade agreement. Therefore, if the proposed amendment becomes law, USTR may consider whether Canada is taking satisfactory measures to grant the rights of the U.S. under the SLA, and if so, may decide on an appropriate modification or termination of the 10% additional duties.

Comments Sought on Possible Change, Transition Methodologies

Interested persons are invited to submit comments on the possible modification or termination of these duties. This request includes comments on possible methodologies for transitioning from a U.S.-collected 10% duty to a 10% export charge collected by Canada.

USTR contacts: John Melle (Deputy USTR for the Americas) (202) 395-3412; Suzanne Garner (Asst General Counsel) (202) 395-3581; William Busis (Chair of Sec. 301 Cmte.) (202) 395-3150; Gwendolyn Diggs (on filing submissions) (202) 395-5830

(D/N USTR-2010-0015, FR Pub 05/28/10)