2010-21486. Notice and Modification of Action: Canada-Compliance with Softwood Lumber Agreement

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice and modification of action.

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 determined in March 2008 that Canada had breached certain SLA obligations. In February 2009, the tribunal issued a remedy award instructing Canada to collect an additional 10 percent ad valorem export charge on softwood lumber shipments from Ontario, Quebec, Manitoba, and Saskatchewan, until an entire amount of CDN $68 million has been collected. Canada did not begin collecting the additional export charge. In April 2009, the United States Trade Representative (“Trade Representative”) initiated an investigation under Section 302 of the Trade Act of 1974, as amended (“Trade Act”). In that investigation, the Trade Representative determined that Canada's failure to implement the tribunal's remedy award had the effect of denying U.S. rights under the SLA; and, pursuant to Section 301 of the Trade Act, the Trade Representative imposed 10 percent ad valorem duties on imports of softwood lumber products subject to the SLA from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan (the April 2009 action). Under the April 2009 action, the duties are to remain in place until such time as the United States collects $54.8 million, the U.S. dollar equivalent of CDN $68 million at the time. The Government of Canada, however, has now adopted its own measures to address Canada's breach of the SLA. In particular, Canada will begin collection of an additional 10 percent charge on exports of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan, which will be effective with respect to softwood lumber products with a shipment date of September 1, 2010 or later. Per an understanding between the Governments of the United States and Canada, Canada will collect the additional 10 percent charge on exports until the total of the amounts collected under the U.S. import duty and the Canadian charge on exports is equal to CDN $68 million. The Trade Representative has determined that Canada's measures satisfactorily grant the rights of the United States under the SLA. Accordingly, the Trade Representative has modified the April 2009 action by removing the 10 percent ad valorem duties on imports of softwood lumber products subject to the SLA from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan, effective with respect to imports with a shipment date of September 1, 2010 or later.

DATES:

The modification of the April 2009 action is effective with respect to imports of softwood lumber products subject to the SLA from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan with a shipment date of September 1, 2010 or later.

FOR FURTHER INFORMATION CONTACT:

John Melle, Deputy Assistant USTR for the Americas, [phone], or Suzanne Garner, Assistant General Counsel, [phone], for questions concerning the enforcement of U.S. rights under the SLA; Heather Sykes, Chief, Trade Policy Branch, U.S. Customs and Border Protection, Department of Homeland Security, [phone], for questions concerning entries of softwood lumber products, or William Busis, Chair of the Section 301 Committee and Deputy Assistant USTR for Monitoring and Enforcement, [phone], for questions concerning procedures under Section 301.

SUPPLEMENTARY INFORMATION:

A. Enforcement of U.S. rights under the SLA

For further information concerning U.S. rights under the SLA and the April 2009 action, see Initiation of Section 302 Investigation, Determination of Action Under Section 301, and Request for Comments: Canada—Compliance With Softwood Lumber Agreement, 74 FR 16,436 (April 10, 2009) (notice); 74 FR 17,276 (April 14, 2009) (annex).

B. Canada's Measures Addressing the Breach of the SLA

Canada has adopted measures to comply with the February 2009 remedy award by imposing a 10 percent export charge on exports of softwood lumber products subject to the SLA from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan. Canada enacted the necessary legislation, in the form of an amendment to the Softwood Lumber Products Export Charge Act, 2006, with parliamentary approval and royal assent on July 12, 2010. On August 4, 2010, Canada issued an Order in Council setting September 1, 2010 as the date to begin imposing the 10% charge on shipments of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan.

Per an understanding between the Governments of the United States and Canada, Canada will collect the additional 10 percent charge on exports until the total of the amounts collected under the U.S. import duty and the Canadian charge on exports is equal to CDN $68 million. The understanding also provides for the United States and Canada to exchange information on the ongoing amounts collected under the U.S. import duty and the Canadian charge on exports.

C. Public Comment

In May 2010, the Section 301 Committee invited comments from interested persons with respect to the possible modification or termination of the April 2009 action in the event the Government of Canada adopted a law imposing an additional 10 percent export charge on softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan. See 75 FR 30097 (May 28, 2010).

D. Modification of April 2009 Action

Section 307 of the Trade Act authorizes the Trade Representative to modify or terminate an action taken under Section 301 if, among other things, “the foreign country is taking satisfactory measures to grant the rights of the United States under a trade agreement.” Sections 301(a)(2)(B)(i) and 307(1)(A). Pursuant to the recommendations of the Trade Policy Staff Committee and the Section 301 Committee, and taking account of the comments received in response to the May 2010 notice, the Trade Representative has determined: (1) That Canada's adoption of the July 2010 amendment to the Softwood Lumber Products Export Charge Act, 2006, and the August 2010 Order in Council constitute “satisfactory measures”; and (2) to modify the April 2009 action by removing the 10% import duty on entries of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan with a shipment date of September 1, 2010 or later. In order to prevent any gap in collection of the charge, the 10% import duty will continue to apply to entries after September 1, 2010 with a shipment date of August 31, 2010 or earlier.

In accordance with the Trade Representative's determination to modify the April 2009 action, and effective with respect to articles entered, or withdrawn from warehouse for consumption, on or after September 1, 2010, U.S. Note 13 to subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States (HTS) is modified by deleting subdivision (i) and inserting the following new subdivision in lieu thereof:

“(i) The additional duties provided for in subheading 9903.53.01 shall apply to articles entered, or withdrawn from warehouse for consumption, on or after September 1, 2010, if the Canadian export permits associated with the entries display a shipment date prior to September 1, 2010. The additional duties provided for in subheading 9903.53.01 shall not apply to articles entered, or withdrawn from warehouse for consumption, on or after September 1, 2010, if the Canadian export permits associated with the entries display a shipment date of September 1, 2010 or later.”

E. Section 306 Monitoring

Pursuant to Section 306(a) of the Trade Act, the Trade Representative will continue to monitor the implementation of Canada's measures imposing a 10 percent export charge on exports of softwood lumber products subject to the SLA from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan. Pursuant to Section 306(b), if the Trade Representative considers that Canada is not satisfactorily implementing these measures, the Trade Representative will determine what further action to take under Section 301.

William L. Busis,

Chair, Section 301 Committee.