[Federal Register Volume 65, Number 42 (Thursday, March 2, 2000)]
[Notices]
[Pages 11363-11364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5084]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Request for Public Comment Regarding Softwood Lumber Practices in 
Canada and Softwood Lumber Trade Between the United States and Canada

AGENCY: Office of the United States Trade Representative (USTR).

ACTION: Request for comments.

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SUMMARY: The interagency Trade Policy Staff Committee (TPSC) seeks 
public comment concerning softwood lumber trade betweem the United 
States and Canada, in light of the pending expiration of the U.S.-
Canada Softwood Lumber Agreement in April 2001. The TPSC invites public 
comment with respect to Canadian softwood lumber practices. 
Furthermore, the TPSC invites comment with respect to economic and 
environmental aspects of: (a) Those softwood lumber practices, (b) 
related U.S.-Canada softwood lumber trade issues, and (c) a possible 
negotiation concerning Canadian provincial lumber practices and 
softwood lumber trade between the United States and Canada.

FOR FURTHER INFORMATION CONTACT: For Procedural questions concerning 
public comments, contact Gloria blue, Executive Secretary, Trade Policy 
Staff Committee, Office of the United States Trade Representative at 
(202) 395-3475. All other questions concerning the U.S.-Canada lumber 
trade issues should be addressed to Mary Ryckman in the agency's Office 
of North American Affairs at (202) 395-3412.

SUPPLEMENTARY INFORMATION:

U.S.-Canada Softwood Lumber Agreement

    On May 29, 1996, the United States and Canada signed the U.S.-
Canada Softwood Lumber Agreement. The five-year Agreement went into 
effect April 1, 1996. Under the Agreement, fee free exports of softwood 
lumber from the four major lumber producing provinces in Canada 
(Alberta, British Columbia, Ontario and Quebec) were limited to 14.7 
billion board feet fee-free a year. These four provinces account for 
95% of lumber shipments from Canada. The Agreement does not impose any 
restrictions on lumber coming from other provinces because timber there 
is sold competitively.
    The details of the Agreement are as follows:
     Softwood lumber means articles classified under tariff 
items 4407.10.00, 4409.10.10, 4409.10.20, and 4409.10.90 of the 
Harmonized Tariff Schedule of the United States.
     The Agreement establishes an export fee system. Shipments 
from the four provinces in excess of 14.7 billion board feet in any 
year are subject to a surcharge of US$50 per thousand board feet up to 
an additional 650 million board feet. Once that level is reached, the 
surcharge is increased to US$100 per thousand board feet. While US$100 
per thousand board feet acts as a substantial deterrent to additional 
shipments in all but the strongest markets, there is no point at which 
shipments from Canada are prohibited outright.
     The Agreement contains a trigger price mechanism, whereby 
an additional 92 million board feet is allowed into the United States 
free of charge for every quarter in which the price of lumber equals of 
exceeds the trigger price (a quarterly average price of $405 per 
thousand board feet of eastern spruce-pine-fir, standard or better, 
kiln-dried, Great Lakes delivered lumber as reported in Random 
Lengths).
     The U.S. Customs Service monitors shipment levels and fee 
payments to ensure that the Agreement is being properly implemented.

Modification of the Softwood Lumber Agreement

    On August 26 1999, the United States and Canada resolved a U.S. 
dispute settlement case under the Agreement over a 1998 timber stumpage 
reduction in British Columbia. The United States considered the 
reduction to be a violation of the 1996 U.S.-Canada Softwood Lumber 
Agreement. British Columbia's June 1, 1998 stumpage change applied to 
all timber grown on provincially-owned lands, which accounts for the 
overwhelming majority of timber harvested in the province. The province 
reduced its timber harvesting fees by an average of C$8.10 per cubic 
meter, or 24%, for timber harvested in coastal areas and by C$3.50 per 
cubic meter, or 14%, on average for inland timber. Estimates are that 
the new, lower fees resulted in an overall price reduction of some 
C$234 million during the first year they were in effect and will lower 
harvesting fees by approximately C$640 million over three years.
    The settlement covers exports from British Columbia for the 
remainder of the Agreement. The settlement calls for Canada to impose a 
new, higher fee on B.C. lumber exports when exports from the province 
exceed recent average annual shipments to the United States. The 
settlement also requires Canada to begin imposing what was, until now, 
the highest export surcharge called for under the Agreement at lower 
lumber export levels than previously was the case. During year four of 
the Agreement (1999/2000), exports from British Columbia subject to the 
lower fee will be limited to 272 million board feet, while upper-fee 
exports will be limited to 110 million board feet. All British Columbia 
exports beyond those amounts will be subject to a new fee of US$146.25/
thousand board feet. In year five, the export volumes triggering fees 
will be the same or lower, and the new fee will be adjusted for 
inflation.

History of Softwood Lumber Trade Between the United States and 
Canada

    On December 30, 1986, the United States and Canada entered into a

[[Page 11364]]

Memorandum of Understanding (MOU) to settle a pending countervailing 
duty (CVD) investigation of Canadian softwood lumber. Among other 
things, the MOU provided for Canada to assess a 15% export fee on 
certain lumber exports to the United States. The fee could be reduced 
or eliminated for exports from a province that too, so-called 
replacement measures to increase stumpage or other charges on lumber.
    In September 1991, as permitted under the MOU, Canada provided 
notice that it was unilaterally terminating the MOU in 30 days. In 
response, in October 1991, Commerce self-initiated a section 301 
investigation, immediately determining Canada's action to be 
unreasonable and to burden or restrict U.S. commerce, and took section 
301 action.
    The section 301 action applied to imports that entered during the 
5-month period (October 1991-March 1992) prior to Commerce's 
preliminary CVD determination. (Imports entering after that time could 
be assessed duties under the CVD laws.) Under the section 301 action, 
USTR required importers of softwood lumber from certain provinces to 
post a bond in an amount up to 15 percent. The amount was lower or zero 
where a province had replacement measures in place. USTR indicated that 
these entries during the interim period prior to Commerce's preliminary 
CVD determination would ultimately be assessed fees in the amount of 
Commerce's final CVD determination.
    Canada challenged in the GATT both the section 301 action and the 
self-initiation of the CVD investigation. The GATT panel issued a mixed 
decision, finding that the initiation of the CVD investigation did not 
violate GATT but that the section 301 action did.
    When the final CVD determination was issued in May 1992 (and while 
the GATT panel proceedings were pending), both the U.S. domestic 
industry and Canadian parties sought review by a binational panel under 
Chapter 19 of the U.S.-Canada FTA. The binational panel found 
Commerce's subsidy determination to be inconsistent with U.S. law and 
directed Commerce to issue a negative CVD determination. An 
Extraordinary Challenge Committee (ECC) requested by the United States 
upheld the panel's decision. Consequently, Commerce revoked the CVD 
order in August 1994, and USTR terminated the section 301 action in 
October 1994.
    In September 1994, the domestic industry filed a lawsuit in U.S. 
court alleging that the binational panel process was unconstitutional. 
In December 1994, the industry withdrew this complaint following the 
establishment of a consultative process between the United States and 
Canada regarding softwood lumber trade. This process ultimately led to 
the signing of the Softwood Lumber Agreement in May 1996.

Request for Comments

    Given that the U.S.-Canada Softwood Lumber Agreement expires in 
April 2001, the TPSC invites public comment with respect to Canadian 
softwood lumber practices. Furthermore, the TPSC invites comment with 
respect to economic and environmental aspects of: (a) Those softwood 
lumber practices, (b) related U.S.-Canada softwood lumber trade issues, 
and (c) a possible negotiation concerning Canadian provincial lumber 
practices and softwood lumber trade between the United States and 
Canada.
    Those persons wishing to submit written comments, should submit ten 
(10) typed copies, no later than noon, Friday, April 14, 2000, to 
Gloria Blue, Executive Secretary, Trade Policy Staff Committee, Office 
of the U.S. Trade Representative, Room 122, 600 Seventeenth Street, NW, 
Washington, DC 20508. Comments should state clearly the position taken 
and should describe with particularly the evidence supporting that 
position. Any business confidential material must be clearly marked as 
such on the cover page (or letter) and succeeding pages. Such 
submissions must be accompanied by a non-confidential summary thereof.
    Non-confidential submissions will be available for public 
inspection at the USTR Reading Room, Room 101, Office of the U.S. Trade 
Representative, 600 Seventeenth Street, NW, Washington, DC. An 
appointment to review the file may be made by calling Brenda Webb at 
(202) 395-6186. The Reading Room is open to the public from 10 a.m. to 
12 noon and from 1 p.m. to 4 p.m., Monday through Friday.

Carmen Suro-Bredie,
Chairman, Trade Policy Staff Committee.
[FR Doc. 00-5084 Filed 3-1-00; 8:45 am]
BILLING CODE 3901-01-M