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U.S. imposes tariffs on softwood lumber from four Canadian provinces

The United States is imposing 10 percent ad valorem customs duties on imports of softwood lumber products from Onta…

The United States is imposing 10 percent ad valorem customs duties on imports of softwood lumber products from Ontario, Quebec, Manitoba, and Saskatchewan, in response to what it views as Canada’s failure to cure a breach of the 2006 Softwood Lumber Agreement. The U.S. also maintains that Canada has failed to impose the compensatory measures determined by an international tribunal. According to United States Trade Representative Ron Kirk, these duties will remain in place until such time as the United States has collected US$54.8 million.
Earlier this year, a tribunal operating under the auspices of the LCIA (formerly the London Court of International Arbitration) issued its decision on a remedy in the softwood lumber arbitration in which Canada was found to have breached the SLA by failing to calculate quotas properly during the first six months of 2007.

Canada has not imposed the compensatory measures determined by the tribunal. Instead, the Government of Canada has authorized and made available a payment of $46.7 million to the United States.

“At this difficult time for the industry, Canada chose this payment alternative instead of imposing an additional export charge, which would result in further mill closures and job losses in communities,” says International Trade Minister Stockwell Day.

Canada is asking the tribunal to confirm that its $46.7-million lump sum payment cures the breach in a manner consistent with the SLA. This payment is equal to the amount of revenue that the U.S. claimed their industry lost due to the breach, and Canada sees this as fully compensating the U.S. for these losses.

The United States does not consider that such an offer cures the breach identified by the tribunal, and the United States formally rejected Canada’s offer on April 2, 2009.  “The United States is taking this action today to enforce our rights under the Softwood Lumber Agreement,” said U.S. Trade Representative Ronald Kirk. “The Softwood Lumber Agreement brought more stability and certainty to an industry that sorely needed it. Current conditions – extremely weak demand and severely depressed prices for the softwood lumber industry – only make it clearer that Canada needs to fulfill its obligations under the Agreement and not continue to avoid the market consequences of its earlier breach.”
The LCIA tribunal determined that, as an appropriate adjustment to compensate for its breach, Canada must collect an additional 10 percent ad valorem export charge on softwood lumber shipments from Eastern Canadian provinces until $68.26 million has been collected. (Based on the exchange rate at the time of the award, the U.S. dollar equivalent is $54.8 million).