Key Elements of the 2006 Softwood Lumber Agreement
This summary is based on the BC Ministry of Forests and Range understanding of the 2006 Softwood Lumber Agreement. Any questions on particular aspects should be referred to the relevant federal departments responsible.
- The federal government is responsible for the administration and operation of the 2006 Softwood Lumber Agreement (SLA).
- The agreement has a 7-year term ending in October 2013, with an option to renew for an additional 2 years.
- The agreement ended costly litigation and provides some certainty for softwood lumber trade in the future. It also secured a return of over USD $4 billion in duties collected by the United States since 2002, of which USD $2 billion were returned to B.C. companies.
- USD $1 billion of the duties remained in the United States.
- USD $500 million was distributed to the United States Coalition lumber companies,
- USD $450 million was set aside to fund meritorious initiatives in the U.S. identified by the U.S. in consultation with Canada, and
- USD $50 million was distributed to the bi-national industry council established under the SLA, composed of representatives from the Canadian and the U.S. lumber industries.
- Canadian regions choose an export charge with a surge penalty (Option A) or an export quota with a lower in-quota export charge (Option B). Both Options run on a monthly basis. Regions may switch Options at year 3 and year 6 of the agreement. British Columbia’s Coast and Interior regions are treated separately in the agreement, and both have chosen Option A.
- The export charge rates under both Options are determined based on the Prevailing Monthly Price, which is the four-week average of the industry standard Random Lengths Framing Lumber Composite Prices available three weeks prior to the month:
- The surge penalty is a retroactive increase of 50% of the monthly tax rate if exports from a region are above 110% of historical levels. The Coast and Interior are subject to separate surge calculations:
- Lumber export tax revenues are collected by Canada Revenue Agency, and remitted to the provinces.
- Remanufacturers who meet certain criteria are charged the export tax on the “first mill” value of their lumber. In other words, there is no export charge on the value-added component of their products. To obtain “first mill” treatment, remanufacturers must not own tenures (including BCTS) and must not be associated with tenure holders.
- Products selling for over USD $500 per thousand board feet will be charged the export tax as if their value were USD $500 per thousand board feet.
- The anti-circumvention provision means governments are prevented from actions that offset the export measure. The agreement explicitly exempts certain types of policies from circumvention claims, including policies that were in place on July 1, 2006 (such as B.C.’s Market Pricing System), policies that improve the market orientation of timber pricing, and policies for environmental management, tenure compensation payments and payments to First Nations to address or settle claims. New policy proposals are examined closely to ensure they are consistent with the agreement.
- Disputes relating to the SLA are resolved through a dispute settlement process outlined in the agreement. Arbitrations are handled by the London Court of International Arbitration.