Written by: John Moccia, Canada Regulatory Affairs
On October 12, 2015, the Softwood Lumber Agreement (SLA) between Canada and the United States of America officially expired. While in effect, the agreement oversaw the most notorious trade dispute in the history of Canadian-American relations.
The long-running dispute began in 1982 over allegations by the United States that the Canadian government unfairly subsidized the growing of Canadian softwood timber, transformed it into lumber, and exported it to the United States. In a nutshell, the two countries have different timber ownership systems. In the United States, some 70% of forest lands are privately owned, while in Canada 94% of forests are on provincial or federally owned lands.
The 2006 Softwood Lumber Agreement (SLA) established a mechanism in limiting the volume of logs exported from Canada. Under the SLA, Canada was required to impose export charges and export volume limitations (quotas) on shipments of softwood lumber products to the United States. Through the use of a lumber price trigger, Canadian softwood lumber producers who exported lumber manufactured in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario or Quebec to the United States, paid an export charge when the price of lumber was US$355 or less per thousand board feet (MBF). Furthermore, the SLA required Canada to establish an export permit system for all exports of softwood lumber products (SLP) to the United States, as set out in Annex 1A of the SLA.
Although the SLA expired, thereby eliminating the export measures and quotas as described above, regulatory amendments to Canada’s Export Control List and Export Permits Regulations (Softwood Lumber Products 2006) occurred to allow for the continuation of the export permit requirement on softwood lumber products.
By continuing to require a permit for softwood lumber products exported to the United States, the Government of Canada and the softwood lumber industry will have access to reliable, accurate data on the province or territory of origin, the volume and the pricing for exports of SLP to the United States from all Canadian provinces and territories.
The 2006 SLA contains one lasting provision still in effect today. The provision known as the “12-month standstill period” prevents either country from taking any kind of trade action against the other. Thereby, allowing both sides a one-year window to structure a new agreement.
However, as is so often the case, history tends to repeat itself and we may well find ourselves in another round of trade litigation over softwood lumber in the not-so-distant future.