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Notices

Softwood Lumber Exports to the United States: 2009 Export Allocation Methodologies

Serial No. 161
Date: December 31, 2008

Table of Contents

1.0 Background

The Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (the softwood lumber agreement) requires Canada to limit export quantities from Option B Regions (Quebec, Ontario, Manitoba and Saskatchewan). To implement this and other requirements, Canada has enacted the Softwood Lumber Products Export Charge Act, 2006 (SLPECA), including amendments of the Export and Import Permits Act (EIPA). The EIPA authorizes the Minister to establish the "Regional Quota Volume" (RQV) for Option B Regions, establish a method for allocating the RQV and allocate the RQV to eligible applicants. The Minister has made an Order that governs eligibility for monthly allocation to exporters in Option B Regions for 2009.

Under the softwood lumber agreement, Regions had the opportunity in 2006 to elect between two border measures: Option A, an export charge; or Option B, an export charge at rates lower than under Option A, with volume restraints. These elections were communicated to the Government of Canada by the provincial governments. In 2006, Quebec, Ontario, Manitoba and Saskatchewan elected Option B. As a result, Softwood Lumber Products first manufactured in those provinces and exported to the United States are subject to an export allocation regime during 2009.

Export allocations may be issued to eligible applicants. Export allocation eligibility criteria have been established after consultation with the respective provinces.

Note: as explained in section 7 below, under the Agreement, effective January 1, 2010, (see Article VII:9 of the SLA) - A Region will have an opportunity to change the option that applies to its exports of softwood lumber to the United States.

Transfers of Export Allocations

Policies respecting the transferability of export allocations are set out in Notice to Exporters 158.

2.0 Purpose

This Notice to Exporters provides an explanation of eligibility criteria respecting export allocations in 2009 for certain Softwood Lumber Products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan and exported to the United States.

The Allocation Method Order (2009) - Softwood Lumber Products, (AMO), an EIPAregulation, establishes the export allocation eligibility criteria for 2009. The AMO is authoritative and it is intended that the present Notice to Exporters will assist exporters by describing elements of Agreement implementation, including the AMO

An export allocation may be used only for obtaining a permit for export to the United States of certain softwood lumber products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan.

Coverage

This Notice applies only to those softwood lumber products included in Export Control List item 5104 that are exported to the United States during 2009.

Only companies that have provided a signed application may be eligible for an export allocation.

Duration

This Notice will remain in effect until December 31, 2009

3.0 Quebec

3.1 Definitions:

"Export Allocation" means an allocation issued under paragraph 6.3(3)(b) of the Export and Import Permits Act (EIPA).

"Force Majeure" means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

"Historic Pool" means the portion of the RQV that is available to Primary Producers with export history.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2005 to October 31, 2008.

"Regional Quota Volume" or "RQV" means the quantity of softwood lumber products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the EIPA, and consistent with the softwood lumber agreement; in particular 4.86% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

"Remanufacturer" means a person who remanufactures - within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 - current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

"Reserve Pool" means the portion of the RQV that is available to Quebec Primary Producers with or without export history.

"Softwood Lumber Products" means the softwood lumber products first manufactured in Quebec that are included in Export Control List item 5104.

3.2 Export Allocation Methodology

  1. The RQV is allocated to Primary Producers and Remanufacturers of Softwood Lumber Products for each of twelve months in a year.

  2. Subject to paragraphs 3.2.13 to 3.2.16 the following paragraphs outline the steps for determining eligibility for export allocation.

  3. Primary Producers and Remanufacturers that exported Softwood Lumber Products to the United States during the Reference Period apply for allocation. Primary Producers request an export allocation from the Historic Pool or from the Reserve Pool. Remanufacturers may receive an export allocation only from the Historic Pool. The Government of Quebec will provide DFAIT with the Reserve Pool participants' production volume history.

  4. Primary Producers that did not export Softwood Lumber Products to the United States during the Reference Period are eligible for an export allocation from the Reserve Pool.

  5. Firstly, calculate the volume of exports during the Reference Period for each eligible applicant and express this as the individual applicant's share.

  6. Secondly, determine the portion of the Quebec RQV that is to be allocated to Remanufacturers based on individual shares calculated in paragraph 5. Calculate an individual Remanufacturers share by multiplying this result by the RQV.

  7. Thirdly, calculate the Historic Pool, as follows:

    • Divide the sum of all primary producers' exports calculated in paragraph 5 by the sum of all applicants' exports; and

    • Multiply this result by 94% to establish the Historic Pool.

  8. Fourthly, determine the Historic Pool share that is to be allocated to individual Primary Producers by dividing the individual company's export volume during the reference period by the total export volume of Historic Pool participants multiplied by the total Historic Pool portion of the RQV.

  9. Fifthly, calculate an individual primary producers' allocation by multiplying their share of the Historic Pool by the RQV. Any unallocated quantity remaining in the Reserve Pool will be allocated to Historic Pool participants.

  10. Sixthly, calculate the Reserve Pool, as follows:

    • Divide the sum of all primary producers' exports calculated in paragraph 5 by the sum of all applicants' exports; and

    • Multiply this result by 6% to establish the Reserve Pool.

  11. Seventhly, determine the Reserve Pool share that is to be allocated to individual Primary Producers, by dividing the individual company's production volume during the period January 1, 2005 to December 31, 2007, by the total production volume of Reserve Pool participants during the period January 1, 2005 to December 31, 2007 multiplied by the total Reserve Pool portion of the RQV.

  12. Finally, calculate an individual primary producer's allocation by multiplying their share of the Reserve Pool by the RQV.

  13. For Reserve Pool participants, the volume allocated to an individual applicant will not exceed 40% of the applicant's average monthly lumber production during the period January 1, 2005 and December 31, 2007. The residual volume will be allocated to Primary Producer participants in the Historic Pool.

  14. Reserve Pool applicants that do not achieve 50% utilization of their export allocations during 2009, generally entailing exports to the United States and transfer with lumber, will not be entitled to export allocations in future years.

  15. Export allocations will be subject to adjustments for errors, corrections and omissions.

  16. Holders of export allocations may carry-forward and/or carry-back up to 12% of their monthly export allocation.

  17. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

4.0 Ontario

4.1 Definitions:

"Export Allocation" means an allocation issued under paragraph 6.3(3)(b) of the Export and Import Permits Act (EIPA).

"Force Majeure" means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2007 through October 31, 2008.

"Regional Quota Volume" or "RQV" means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the EIPA, and consistent with the softwood lumber agreement; in particular 3.34% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

"Remanufacturer" means a person who remanufactures - within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 - current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

"Softwood Lumber Products" means the softwood lumber products first manufactured in Ontario that are included in the Export Control List.

4.2 Export Allocation Methodology:

  1. The RQV is allocated to Primary Producers and Remanufacturers of Softwood Lumber Products for each of twelve months in a year for which export measures apply.

  2. Subject to paragraphs 4.2.10 and 4.2.11 the following paragraphs outline the steps for determining eligibility for export allocation.

  3. Firstly, calculate the total volume of exports of Softwood Lumber Products during the Reference Period by Primary Producers and Remanufacturers.

  4. Secondly, express each individual Primary Producer and Remanufacturers total exports as a percentage of the total exports calculated in paragraph 3.

  5. Thirdly, for all eligible Primary Producers and Remanufacturers multiply the 2008 individual applicant's percentage share by 90%

  6. Fourthly, for each individual applicant determine the greater of the shares calculated in paragraphs 4 and 5.

  7. Fifthly, if it is determined the individual applicant's percentage share as determined in paragraph (4) is greater than that determined in paragraph (5), calculate the individual applicants share as follows:

    1. Divide the applicant's percentage share by the sum of the percentage shares of all companies whose greater percentage share is determined in paragraph 4.
    2. Multiply the result calculated in (a) by one minus the total percentage shares of all companies whose share is determined in 5.

  8. Sixthly, if it is determined that the individual applicant's percentage share calculated in paragraph (5) is greater than that calculated in paragraph (4), the individual applicant's share shall be that determined in paragraph 5.

  9. In future, a Temporary Pool may be established from under-utilized export allocations that may become available. "Temporary Pool" means a portion of the RQV that may be available for persons granted an opportunity to use Crown timber pursuant to Section 24 of the Crown Forest Sustainability Act, R.S.O. 1994.

  10. Export allocations will be subject to adjustments for errors, corrections, and omissions.

  11. Holders of export allocations may carry-forward and/or carry-back up to 12% of its monthly export allocation.

  12. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

5.0 Manitoba

5.1 Definitions:

"Export Allocation" means an allocation issued under paragraph 6.3(3)(b) of the Export and Import Permits Act (EIPA).

"Force Majeure" means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2007 through October 31, 2008.

"Regional Quota Volume" or "RQV" means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the EIPA, and consistent with softwood lumber agreement; in particular 0.31% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

"Remanufacturer" means a person who remanufactures - within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 - current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

"Softwood Lumber Products" means the softwood lumber products first manufactured in Manitoba that are included in the Export Control List.

5.2 Export Allocation Methodology

  1. The RQV is allocated to Primary Producers and Remanufacturers of Softwood Lumber Products for each of twelve months in a year for which export measures apply.

  2. Subject to paragraphs 5.2.9 and 5.2.10 the following paragraphs outline the steps for determining eligibility for export allocation.

  3. Firstly, calculate the total volume of exports of Softwood Lumber Products during the Reference Period by Primary Producers and Remanufacturers.

  4. Secondly, express each individual Primary Producer and Remanufacturers total exports as a percentage of the total exports calculated in paragraph 3.

  5. Thirdly, for all eligible Primary Producers and Remanufacturers multiply the 2008 individual applicant's percentage share by 90%

  6. Fourthly, for each individual applicant determine the greater of the shares calculated in paragraphs 4 and 5.

  7. Fifthly, if it is determined the individual applicant's percentage share as determined in paragraph (4) is greater than that determined in paragraph (5), calculate the individual applicant's share as follows:

    1. Divide the applicant's percentage share by the sum of the percentage shares of all companies whose greater percentage share is determined in paragraph 4.

    2. Multiply the result calculated in (a) by one minus the total percentage shares of all companies whose share is determined in paragraph 5.

  8. Sixthly, if it is determined that the individual applicant's percentage share calculated in paragraph (5) is greater than that calculated in paragraph (4), the individual applicants share shall be that determined in paragraph 5.

  9. Export allocations will be subject to adjustments for errors, corrections, and omissions.

  10. Holders of export allocations may carry-forward and/or carry-back up to 12% of its monthly export allocation.

  11. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Export and Import Controls Bureau (EICB) as soon as possible.

6.0 Saskatchewan

6.1 Definitions:

"Export Allocation" means an allocation issued under paragraph 6.3(3)(b) of the Export and Import Permits Act (EIPA).

"Force Majeure" means a situation in which lumber production is not possible due to a fire, strike, the inability to access log or lumber supply or other condition beyond the control of the company.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produced former or Quebec softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2007 through October 31, 2008.

"Regional Quota Volume" or "RQV" means the quantity of Softwood Lumber Products that may be exported during a month as determined by the Minister under subsection 6.3(2) of the EIPA, and consistent with softwood lumber agreement; in particular 0.46% of monthly expected U.S. consumption multiplied by a price adjustment factor (when the framing lumber composite (FLC) average monthly price is at $US336 or over, the factor is 1; when the FLC average monthly price is at $US316-335, the factor is 32/34; when the FLC average monthly price is at US$315 or under, the factor is 30/34).

"Remanufacturer" means a person who remanufactures - within the meaning of subsection 12(1) of the Softwood Lumber Products Export Charge Act, 2006 - current softwood lumber products and, in the case of Quebec, includes a person who remanufactured former softwood lumber products.

"Softwood Lumber Products" means the softwood lumber products first manufactured in Saskatchewan that are included in the Export Control List.

6.2 Export Allocation Methodology

  1. Subject to paragraphs 6.2.7 and 6.2.8 the following paragraphs outline the steps for determining eligibility for export allocation.

  2. Firstly, calculate exports of Softwood Lumber Products during the Reference Period by Primary Producers and Remanufacturers.

  3. Secondly, express the exports calculated in paragraph two, as the individual applicant's percentage share of the total regional quota volume for Saskatchewan during the reference period.

  4. Thirdly, allocate the Base Pool RQV to Primary Producers and Remanufacturers based on the shares calculated above

  5. Finally, the remaining RQV not allocated in the above steps will be allocated on a first-come, first-served basis to export permit applicants.

  6. Subject to the carry-forward/carry-back provisions described below, export permits for exports of Softwood Lumber Products to the United States will be issued to applicants in a quantity that does not exceed the RQV.

  7. Export allocations will be subject to adjustments for errors, corrections, and omissions.

  8. 12% of the RQV may be carried-forward and/or carried-back.

7.0 Border Measure Option - Election by Regions 2010

Under the softwood lumber agreement, each Region has the opportunity to review its election of the border measure that applies to exports of softwood lumber products to the United States from that Region effective January 1, 2010. During 2009, the Government of Canada will seek from provincial governments the election between Option A and Option B, as described in Section 1 - Background, for each Region subject to the border measure. This election of a border measure will result in the imposition of the elected border measure for the following three calendar years: 2010, 2011 and 2012. As a result, the nature of the border measure and the export allocations, if applicable, for any given province or Region may change considerably effective January 1, 2010.

8.0 Further Information

For further information with respect to the Canada - U.S. Softwood Lumber Agreement, please contact:

Softwood Lumber Division (TNS)
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2
Hot Line 613-944-2167
Facsimile 613-944-1452
Softwood Lumber E-mail address
Softwood Lumber Web Page

For further information with respect to the export controls on shipments of softwood lumber to the United States, please contact:

Softwood Lumber Controls Division (TIS)
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2
Hot Line 613-944-2168 or 1-877-808-8838
Facsimile 613-995-5137
Softwood Lumber E-mail address
Softwood Lumber Web Page