[Federal Register Volume 74, Number 68 (Friday, April 10, 2009)]
[Notices]
[Pages 16436-16438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-8232]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. USTR-2009-0011]


Initiation of Section 302 Investigation, Determination of Action 
Under Section 301, and Request for Comments: Canada--Compliance With 
Softwood Lumber Agreement

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of initiation of Section 302 investigation and 
determinations therein; imposition of duties on certain softwood lumber 
from Canada; and request for public comment.

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SUMMARY: Under the 2006 Softwood Lumber Agreement (SLA), Canada agreed 
to impose export measures on Canadian exports of softwood lumber 
products to the United States. At the request of the United States, an 
arbitral tribunal established under the SLA found that Canada had not 
complied with certain SLA obligations, and in February 2009 the 
tribunal issued an award concerning the remedy to be applied. In order 
to enforce U.S. rights under the SLA, the United States Trade 
Representative (``Trade Representative'') has initiated an 
investigation under Section 302 of the Trade Act of 1974, as amended 
(``Trade Act''). In that investigation, the USTR has (i) Determined 
that Canada is denying U.S. rights under the SLA; (ii) found that 
expeditious action is required to enforce U.S. rights under the SLA; 
and (iii) determined that appropriate action under Section 301 of the 
Trade Act is to impose 10 percent ad valorem duties on imports of 
softwood lumber products from the provinces of Ontario, Quebec, 
Manitoba, and Saskatchewan, as set out in the annex to this notice. The 
duties will remain in place until such time as the United States has 
collected $54.8 million, which is the amount determined by the arbitral 
tribunal. Interested persons are invited to submit comments on the 
determinations in this investigation, and to participate in a public 
hearing in the event a hearing is requested.

DATES: Effective Date: The 10 percent ad valorem duties on imports of 
softwood lumber products from the provinces of Ontario, Quebec, 
Manitoba, and Saskatchewan shall be effective with respect to products 
that are entered for consumption or withdrawn from warehouse for 
consumption on or after April 15, 2009.

ADDRESSES: Non-confidential comments (as explained below) should be 
submitted electronically via the Internet at http://www.regulations.gov, docket number USTR-2009-0011. If you are unable to 
provide submissions by http://www.regulations.gov, please contact Sandy 
McKinzy at (202) 395-9483 to arrange for an alternative method of 
transmission. If (as explained below), the comment contains 
confidential information, then persons wishing to submit such comments 
should contact Sandy McKinzy at (202) 395-9483.

FOR FURTHER INFORMATION CONTACT: John Melle, Deputy Assistant USTR for 
the Americas, (202) 395-9448, or Daniel Stirk, Assistant General 
Counsel, (202) 395-9617, for questions concerning the enforcement of 
U.S. rights under the SLA; William Busis, Associate General Counsel and 
Chair of the Section 301 Committee, (202) 395-3150, for questions 
concerning procedures under Section 301; or Gwendolyn Diggs, Staff 
Assistant to the Section 301 Committee, (202) 395-5830, for questions 
concerning procedures for filing submissions in response to this 
notice.

SUPPLEMENTARY INFORMATION:

A. Enforcement of U.S. Rights Under the SLA

    Under the SLA, Canada agreed to impose export measures on Canadian 
exports of softwood lumber products to the United States. When the 
prevailing monthly price of lumber, determined per the Agreement, is 
above US$355 per thousand board feet (MBF), Canadian lumber exports are 
unrestricted. When prices are at or below US$355 per MBF, each Canadian 
exporting region has chosen to be subject to either an export tax with 
a soft volume cap or a lower export tax with a hard volume cap. The 
export measures are to be adjusted in accordance with the market price 
of lumber, and the SLA includes an adjustment mechanism to ensure that 
the export volume caps are calculated

[[Page 16437]]

appropriately under rapidly changing market conditions.
    The SLA provides that disputes under the agreement may be submitted 
to an arbitral tribunal operating under the auspices of the LCIA 
(formerly the London Court of International Arbitration). In order to 
enforce U.S. rights under the SLA, in August 2007 the United States 
requested that an arbitral tribunal examine a U.S. claim that Canada 
was not complying with its SLA obligations to impose export measures. 
In a March 2008 award on liability, the tribunal agreed with the United 
States that Canada failed properly to calculate export quotas for the 
Eastern provinces during the first six months of 2007.\1\ In a February 
26, 2009 award on remedy, the tribunal found that Canada's failure to 
make the downward adjustments provided for under the SLA resulted in 
greater levels of shipments from Canada than were allowed under the 
SLA, a failure which exacerbated already difficult market 
conditions.\2\
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    \1\ The Award on Liability can be viewed on USTR's Web site: 
http://www.ustr.gov.
    \2\ The Award on Remedy can be viewed on USTR's Web site: http://www.ustr.gov.
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    In its February 2009 award on remedy, the tribunal (i) rejected 
Canada's argument that Canada had already cured the breach simply by 
starting to apply the adjustment and thus that no further remedy was 
required, and (ii) determined that appropriate adjustments to the 
export measures in light of Canada's breach would consist of collecting 
an additional 10 percent export charge until Canada had collected CDN 
$68.26 million. (Based on the exchange rate at the time of the award, 
the U.S. dollar equivalent is $54.8 million.) The tribunal ordered 
Canada to cure its breach within 30 days, the maximum period permitted 
under the SLA. The tribunal determined that if Canada failed to cure 
the breach within 30 days, the SLA required Canada to impose the 
compensatory export measures as determined by the tribunal. The 
tribunal did not opine upon what an adequate cure would be.
    During the 30-day period, the United States and Canada discussed 
Canada's intended course of action to cure the breach. Canada took no 
action during the 30-day period, which expired on March 28, 2009. On 
March 27, 2009, Canada informed the United States that it did not 
intend to adopt any export measure, and instead its only action would 
be to make an offer of a monetary payment to the Government of the 
United States. A monetary payment, however, would do nothing to cure 
Canada's breach resulting from excess shipments of softwood lumber in 
2007.
    The SLA provides that in the event the complaining party finds that 
the defending party has failed to cure the breach or impose the 
compensatory adjustments determined by the Tribunal within 30 days of 
an award, the complaining party is entitled to impose the compensatory 
measures itself. Accordingly, with regard to Canada's 2007 breach of 
the SLA, the SLA authorizes the United States to impose duties in an 
amount not to exceed the additional export charges that the tribunal 
has specified as compensation for the breach. The SLA contemplates the 
use of Section 301 as a mechanism for imposing such duties.

B. Initiation of Section 302 Investigation and Determinations Therein

    Section 302(b) of the Trade Act authorizes the Trade Representative 
to initiate an investigation of any matter covered under Section 301, 
including whether the rights of the United States under a trade 
agreement are being denied. In accordance with the recommendation of 
the interagency Section 301 Committee, the Trade Representative has 
initiated an investigation of whether Canada has denied U.S. rights 
under the SLA.
    Section 303 of the Trade Act requires that the Trade Representative 
request consultations on the date of initiation of the investigation 
with the country subject to the investigation. Accordingly, the United 
States has issued a consultation request to the Government of Canada 
concerning Canada's compliance with its SLA obligations.
    Section 304(b) of the Trade Act requires that the Trade 
Representative engage in certain consultations before making 
determinations in a Section 301 investigation. However, if expeditious 
action is required, the Trade Representative may first make 
determinations in the investigation, and then engage in Section 304 
consultations. In accordance with the recommendation of the Section 301 
Committee, the Trade Representative has found that expeditious action 
is required to secure U.S. rights under the SLA.
    Under Section 304(a)(1) of the Trade Act, the Trade Representative 
shall determine whether the rights of the United States under a trade 
agreement are being denied. If the determination is affirmative, the 
Trade Representative shall further determine what action to take under 
Section 301.
    On the basis of the awards of the LCIA Tribunal and Canada's 
failure to impose export charges or any other acceptable measure to 
cure the breach, and in accordance with the recommendation of the 
Section 301 Committee, the Trade Representative has determined (1) that 
Canada is denying U.S. rights under the SLA, and (2) that appropriate 
action under Section 301(a)(1) of the Trade Act is to impose 10 percent 
ad valorem duties on imports of softwood lumber products from Canada 
originating in Ontario, Quebec, Manitoba, and Saskatchewan. The details 
of the action under Section 301 of the Trade Act are set out in the 
annex to this notice. The duties will apply to articles entered for 
consumption or withdrawn from warehouse for consumption on or after 
April 15, 2009. The procedures set forth in the U.S. Customs and Border 
Protection (CBP) test program for post entry amendments may not be used 
by participants in that test to submit amendments regarding entries 
affected by this action.
    The duties will remain in place until such time as the United 
States has collected $54.8 million in duties. USTR will notify U.S. 
Customs and Border Protection (CBP) of the date on which to cease 
collecting the additional duties, and USTR will make a public 
announcement and publish a notice in the Federal Register terminating 
the application of the additional duties.

C. Opportunity for Public Comments

    In accordance with Section 304 of the Trade Act, the Section 301 
Committee invites comments from interested persons with respect to the 
determinations made in this investigation. In particular, the comments 
invited by the Committee include whether Canada is denying U.S. rights 
under the SLA, and whether the imposition of the 10 percent duty 
pursuant to this notice is an appropriate action in response. Any 
comments should be submitted within 30 days of the publication of this 
notice (by no later than May 11, 2009).
    Section 304 of the Trade Act also provides that any interested 
person may request a public hearing on these matters. Any request for a 
public hearing should be made within 10 days of the publication of this 
notice (by no later than April 20, 2009). In the event a hearing is 
requested, USTR will issue a notice specifying the date of the hearing 
and the procedures for submitting written testimony.
    To submit comments via http://www.regulations.gov, enter docket 
number USTR-2009-0011 on the home page and click ``go''. The site will

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provide a search-results page listing all documents associated with 
this docket. Find a reference to this notice by selecting ``Notice'' 
under ``Document Type'' on the left side of the search-results page, 
and click on the link entitled ``Send a Comment or Submission.'' (For 
further information on using the http://www.regulations.gov Web site, 
please consult the resources provided on the Web site by clicking on 
``How to Use This Site'' on the left side of the home page.)
    The http://www.regulations.gov site provides the option of 
providing comments by filling in a ``General Comments'' field, or by 
attaching a document. Given the detailed nature of the comments sought 
by the Section 301 Committee, all comments should be provided in an 
attached document. Submissions must state clearly the position taken 
and describe with specificity the supporting rationale and must be 
written in English. After attaching the document, it is sufficient to 
type ``See attached'' in the ``General Comments'' field.
    Comments will be placed in the docket and open to public inspection 
pursuant to 15 CFR 2006.13, except confidential business information 
exempt from public inspection in accordance with 15 CFR 2006.15 or 
information determined by USTR to be confidential in accordance with 19 
U.S.C. 2155(g)(2). Comments may be viewed on the http://www.regulations.gov Web site by entering docket number USTR-2009-0011 
in the search field on the home page.
    Persons wishing to submit business confidential information must 
certify in writing that such information is confidential in accordance 
with 15 CFR 2006.15(b), and such information must be clearly marked 
``BUSINESS CONFIDENTIAL'' at the top and bottom of the cover page and 
each succeeding page. Any comment containing business confidential 
information must be accompanied by a non-confidential summary of the 
confidential information. The non-confidential summary will be placed 
in the docket and open to public inspection. Comments containing 
business confidential information should not be submitted via the 
http://www.regulations.gov Web site. Instead, persons wishing to submit 
comments containing business confidential information should contact 
Sandy McKinzy at (202) 395-9483. Information or advice contained in a 
comment submitted, other than business confidential information, may be 
determined by USTR to be confidential in accordance with section 
135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the 
submitter believes that information or advice may qualify as such, the 
submitter--
    (1) Must clearly so designate the information or advice;
    (2) Must clearly mark the material as ``SUBMITTED IN CONFIDENCE'' 
at the top and bottom of the cover page and each succeeding page; and
    (3) Must provide a non-confidential summary of the information or 
advice.
    The non-confidential summary will be placed in the docket and open 
to public inspection. Comments submitted in confidence should not be 
submitted via the http://www.regulations.gov Web site. Instead, persons 
wishing to submit such comments should contact Sandy McKinzy at (202) 
395-9483.

William L. Busis,
Chair, Section 301 Committee.
[FR Doc. E9-8232 Filed 4-9-09; 8:45 am]
BILLING CODE 3190-W9-P