Notice to Exporters

Softwood Lumber Exports to the United States: 2011 Export Allocation Methodologies

Serial No. 174
Date: November 29, 2010

Table of Contents

• 1.0 Background
• 2.0 Purpose
• 3.0 Coverage
• 4.0 Duration
• 5.0 Quebec
• 6.0 Ontario
• 7.0 Manitoba
• 8.0 Saskatchewan
• 9.0 Further Information

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1.0 Background

The Softwood Lumber Agreement 2006 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 of Foreign Affairs (the "Minister") to determine the "Regional Quota Volume" (RQV) for Option B Regions, and to establish a method for allocating the RQV to eligible applicants. A Ministerial Order specifies the method for allocating export allocations to exporters in the Option B Regions.

Under the Softwood Lumber Agreement, each Region had the opportunity, for exports beginning on January 1, 2010, to elect between two border measures: Option A, an export charge; or Option B, lower export charges but with volume restraints. Choices were communicated to the Government of Canada by the provincial governments. For the period beginning in January 2010, 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 continue to be subject to an export allocation regime during 2011.

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

2.0 Purpose

This Notice to Exporters is to inform exporters of the Minister's decision respecting the allocation methodology and provide the eligibility criteria for export allocations of certain Softwood Lumber Products first manufactured in Quebec, Ontario, Manitoba and Saskatchewan and exported to the United States in 2011.

The Allocation Method Order (2011) – Softwood Lumber Products, (the "AMO"), takes effect on January 1, 2011 and establishes the export allocation eligibility criteria for 2011. The AMO is authoritative and it is intended that the present Notice to Exporters will assist exporters by describing elements of the AMO.

An export allocation may be used for obtaining a permit to export certain Softwood Lumber Products (first manufactured in Quebec, Ontario, Manitoba and Saskatchewan) to the United States.

3.0 Coverage

This Notice cancels and replaces Notice to Exporters SER-167 of December 2, 2009. It refers to those Softwood Lumber Products included in Export Control List item 5104 as part of the Softwood Lumber Agreement 2006 implementation.

Only companies that have provided a signed application and are registered under section 23 of the SLPECA may be eligible for an export allocation.

4.0 Duration

This Notice will remain in effect until December 31, 2011.

5.0 Quebec

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.

"Historic Pool" means the portion of the RQV that is available to Primary Producers with export history that elect to receive an allocation from the Historic Pool.

"Primary Producer" means a person who produces Softwood Lumber Products from softwood sawlogs and, in the case of Quebec, includes a person who produced Quebec Softwood Lumber Products from softwood sawlogs.

"Reference Period" means November 1, 2007 to October 31, 2010.

"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 softwood lumber products, within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006.

"Reserve Pool" means the portion of the RQV that is available to Quebec Primary Producers, with or without export history, that elect to receive an allocation from the Reserve Pool.

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

5.2 Export Allocation Methodology

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

2. Subject to paragraphs 5.2.12 to 5.2.14 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 may apply for an 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.

4. Primary Producers that did not export Softwood Lumber Products to the United States during the Reference Period are only eligible for an export allocation from the Reserve Pool. The Government of Quebec will provide DFAIT with the Reserve Pool participants' production volume history.

5. Firstly, the volume of exports during the Reference Period for each eligible applicant is calculated and expressed as the individual applicant's share.

6. Secondly, the portion of the Quebec RQV that is to be allocated to Remanufacturers is determined based on individual shares calculated in section 5.2.5. An individual Remanufacturer's share is calculated by multiplying this result with the RQV. The sum of these shares to be allocated to Remanufacturers must be greater than or equal to 10% of the Quebec RQV. If an additional share of the Quebec RQV is needed to satisfy this condition, each individual's share will be pro-rated against this additional share of the Quebec RQV in order to determine an individual's share of the Quebec RQV and to satisfy the minimum 10% requirement.

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

1. Divide the sum of all primary producers' exports by the sum of ALL applicants' exports and multiply by the RQV; and
2. Subtract any of the additional share required in order to satisfy the required 10% of the Quebec RQV allocated to Remanufacturers as set out in 5.2.6; and
3. Multiply the result of a) and b) by 96% to establish the Historic Pool;
4. Multiply the result of a) and b) by 4% to establish the Reserve 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, as calculated in section 5.2.7.c). Any unallocated quantity remaining in the Reserve Pool will be allocated to Historic Pool participants.

9. Finally, 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 of January 1, 2007 to December 31, 2009, by the total production volume of Reserve Pool participants during the period of January 1, 2007 to December 31, 2009 multiplied by the total Reserve Pool portion of the RQV as calculated in 5.2.7.d). Any unallocated quantity remaining in the Reserve Pool will be allocated to Historic Pool participants.

10. 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 of January 1, 2007 and December 31, 2009. The residual volume will be allocated to Primary Producer participants in the Historic Pool.

11. Reserve Pool applicants that do not achieve 50% utilization of their export allocations during 2011, generally entailing exports to the United States and transfers with lumber, will not be entitled to export allocations from the Reserve Pool in future years.

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

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

14. When a force majeure situation prevents an allocation holder from exporting Softwood Lumber Products during a specified period, the allocation holder should inform the Softwood Lumber Control Division as soon as possible.

6.0 Ontario

6.1 Definitions

"Export Allocation" means an allocation issued under paragraph 6.3(3b) 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 conditions beyond the control of the company.

"Primary Producer" means a person who produces softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2007 through October 31, 2010.

"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 softwood lumber products, within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006.

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

6.2 Export Allocation Methodology

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

2. Subject to paragraphs 6.2.10 to 6.2.12 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 eligible Primary Producer and Remanufacturers total exports during the reference period as a percentage of the total exports calculated in paragraph 6.2.3.

5. Finally, the Ontario RQV is allocated to eligible Primary Producers and Remanufacturers based on each individual shares calculated in paragraph 6.2.4.multiplied by 97%.

6. The remainder is established as 3% of the Ontario RQV.

7. Any of remaining Ontario RQV quantity that is unallocated as described in 6.2.6 will be allocated on a first-come, first-served basis to export permit applicants, contingent on 6.2.8 and 6.2.9.

8. Companies that have received an allocation of the Ontario RQV can only acess this remaining quantity of the Ontario RQV once they have fully utilized their Ontario monthly allocations including the applicable carry-forward, carry-back provision. Once an individual company has met this condition, they can apply for a share of this remainder on an export permit by export permit basis until the remaining 3% of the Ontario RQV and applicable carry-forward, carry-back provision is fully allocated.

9. Companies who do not hold an export allocation for Softwood Lumber Products first manufactured in Ontario, will need to apply for this remainder on a export permit by export permit basis for the requested export allocation until the remaining 3% of the Ontario RQV and applicable carry-forward,carry-back provision is fully allocated.

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 their 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 Softwood Lumber Control Division as soon as possible.

7. Manitoba

7.1 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 conditions beyond the control of the company.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs.

Reference Period" means November 1, 2006 through October 31, 2009.

"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 softwood lumber products, within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006.

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

7.2 Export Allocation Methodology

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

2. Subject to paragraphs 7.2.10 to 7.2.12 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 eligible Primary Producer and Remanufacturers total exports during the reference period as a percentage of the total exports calculated in paragraph 7.2.3.

5. Finally, the Manitoba RQV is allocated to eligible Primary Producers and Remanufacturers based on each individual shares calculated in paragraph 7.2.4.multiplied by 97%.

6. The remainder is established as 3% of the Manitoba RQV.

7. Any of remaining Manitoba RQV quantity that is unallocated as described in 7.2.6 will be allocated on a first-come, first-served basis to export permit applicants, contingent on 7.2.8 and 7.2.9.

8. Companies that have received an allocation of the Manitoba RQVcan only acess this remaining quantity of the Manitoba RQV once they have fully utilized their Manitoba monthly allocations including the applicable carry-forward, carry-back provision. Once an individual company has met this condition, they can apply for a share of this remainder on an export permit by export permit basis until the remaining 3% of the Manitoba RQVand applicable carry-forward, carry-back provision is fully allocated.

9. Companies who do not hold an export allocation for Softwood Lumber Products first manufactured in Manitoba, will need to apply for this remainder on a export permit by export permit basis for the requested export allocation until the remaining 3% of the Manitoba RQV and applicable carry-forward, carry-back provision is fully allocated.

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 their 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 Softwood Lumber Control Division as soon as possible.

8.Saskatchewan

8.1 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 conditions beyond the control of the company.

"Primary Producer" means a person who produces current softwood lumber products from softwood sawlogs.

"Reference Period" means November 1, 2007 through October 31, 2010.

"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 softwood lumber products, within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006.

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

8.2 Export Allocation Methodology

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

2. Subject to paragraphs 8.2.10 to 8.2.12 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 eligible Primary Producer and Remanufacturers total exports during the reference period as a percentage of the total exports calculated in paragraph 8.2.3.

5. Finally, the Saskatchewan RQV is allocated to eligible Primary Producers and Remanufacturers based on each individual shares calculated in paragraph 8.2.4 multiplied by 40%.

6. The remainder is established as 60 % of the Saskatchewan RQV.

7. Any of the remaining Saskatchewan RQV quantity that is unallocated as described in 8.2.6 will be allocated on a first-come, first-served basis to export permit applicants contingent on 8.2.8 and 8.2.9.

8. Companies who have received an allocation of the Saskatchewan RQV can only acess this remaining quantity of the Saskatchewan RQV once they have fully utilized their Saskatchewan monthly allocations including the applicable carry-forward, carry-back provision. Once an individual company has met this condition, they can apply for a share of this remainder on an export permit by export permit basis until the remaining 60% of the Saskatchewan RQV and applicable carry-forward, carry-back provisionis fully allocated.

9. Companies who do not hold an export allocation for Softwood Lumber Products first manufactured in Saskatchewan, will need to apply for this remainder on an export permit by export permit basis for the requested export allocation until the remaining 60% of the Saskatchewan RQV and applicable carry-forward, carry-back provision is fully allocated.

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 their 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 Softwood Lumber Controls Division as soon as possible..

9.0 Further Information

For further information with respect to the export controls on shipments of Softwood Lumber Products to the United States, please contact:

Softwood Lumber Controls Division (TNC)
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
E-mail address: softwood.boisdoeuvre@international.gc.ca
Web Page: http://www.softwoodlumber.gc.ca.

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
E-mail address: softwood.boisdoeuvre@international.gc.ca
Web Page: http://www.softwoodlumber.gc.ca.