Vol. 141, No. 15 — July 25, 2007

Registration
SOR/2007-166 July 13, 2007

EXPORT AND IMPORT PERMITS ACT SOFTWOOD LUMBER PRODUCTS EXPORT CHARGE ACT, 2006

Allocation Method Order – Softwood Lumber Products

The Minister of Foreign Affairs, pursuant to paragraph 6.3(3)(a) (see footnote a) of the Export and Import Permits Act and section 108 of the Softwood Lumber Products Export Charge Act, 2006 (see footnote b), hereby makes the annexed Allocation Method Order – Softwood Lumber Products.

Ottawa, July 12, 2007

PETER GORDON MACKAY
Minister of Foreign Affairs

ALLOCATION METHOD ORDER – SOFTWOOD LUMBER PRODUCTS

Definitions	1. The following definitions apply in this Order.
"Act" « Loi »	"Act" means the Export and Import Permits Act.
"current softwood lumber products" « produits de bois d'œuvre courants »	"current softwood lumber products" means the products described in item 5104, Group 5, of the schedule to the Export Control List.
"exported" « exporté »	"exported" has the meaning set out in section 6.4 of the Act.
"former softwood lumber products" « anciens produits de bois d'œuvre »	"former softwood lumber products" means the products described in item 5105, Group 5, of the schedule to the Export Control List as it existed during the reference period.
"Manitoba quantity" « quantité pour le Manitoba »	"Manitoba quantity" means the quantity of current softwood lumber products that may be exported from Manitoba to the United States during a month under subsection 6.3(2) of the Act.
"Ontario quantity" « quantité pour l'Ontario »	"Ontario quantity" means the quantity of current softwood lumber products that may be exported from Ontario to the United States during a month under subsection 6.3(2) of the Act.
"primary producer" « entreprise de première transformation »	"primary producer" means a person who produced or produces former, current or Quebec softwood lumber products from softwood sawlogs.
"primary producer's products" « produits d'une entreprise de première transformation »	"primary producer's products" means the former softwood lumber products that the primary producer produced at any time and that were not remanufactured in Canada.
"Quebec quantity" « quantité pour le Québec »	"Quebec quantity" means the quantity of current softwood lumber products that may be exported from Quebec to the United States during a month under subsection 6.3(2) of the Act.
"Quebec softwood lumber products" « produits de bois d'œuvre du Québec »	"Quebec softwood lumber products" means the softwood lumber products produced in Quebec that were reported to the Minister of Natural Resources and Wildlife under the Forest Act, R.S.Q., c. F-4.1.
"reference period" « période de référence »	"reference period" means the period beginning on April 1, 2001 and ending on December 31, 2005.
"remanufacturer" « entreprise de seconde transformation »	"remanufacturer" means a person who remanufactured or remanufactures — within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006 — former or current softwood lumber products.
"remanufacturer's products" « produits d'une entreprise de seconde transformation »	"remanufacturer's products" means the former softwood lumber products that the remanufacturer remanufactured at any time and that were not further remanufactured in Canada.
"Saskatchewan quantity" « quantité pour la Saskatchewan »	"Saskatchewan quantity" means the quantity of current softwood lumber products that may be exported from Saskatchewan to the United States during a month under subsection 6.3(2) of the Act.
Application	2. This Order establishes the method for allocating the monthly quantity of current softwood lumber products that may be exported from Ontario, Quebec, Manitoba and Saskatchewan in 2007 for the purposes of paragraph 6.3(3)(a) of the Act.
PART 1 ONTARIO
Allocation	3. The allocation of the Ontario quantity to a primary producer or remanufacturer who applies for an export allocation is calculated in accordance with the formula
OQ × (HP/THP)
where OQ is the Ontario quantity; HP is the primary producer's or remanufacturer's percentage share as determined under section 4; and THP is the total of all primary producers' and remanufacturers' percentage shares as determined under section 4.
Best 12-month period	4. (1) In this section, "best 12-month period", in respect of a primary producer, means the 12-month period set out in the description of PPBEV in paragraph (2)(a) and, in respect of a remanufacturer, means the 12-month period set out in the description of RBEV in paragraph (3)(a).
Primary producer's percentage share	(2) The percentage share of a primary producer is the higher of the percentages calculated under paragraphs (a) and (b): (a) the percentage calculated in accordance with the formula
(PPBEV/TBEV) × 100
where PPBEV is the highest volume of the primary producer's products that were exported from Ontario to the United States under export permits during a period of 12 consecutive months within the reference period, and TBEV is the total volume of the primary producers' and remanufacturers' products exported from Ontario to the United States under export permits during their respective best 12-month periods, excluding the volume of primary producers and remanufacturers who indicate in writing to the Minister before December 14, 2006 that they relinquish their allocation of the Ontario quantity for 2007; (b) the percentage calculated in accordance with the formula
(PPEO/TEO) × 100
where PPEO is the volume of the primary producer's products that were exported from Ontario to the United States under export permits during the reference period, and TEO is the total volume of the primary producers' and remanufacturers' products exported from Ontario to the United States under export permits during the reference period, excluding the volume of primary producers and remanufacturers who indicate in writing to the Minister before December 14, 2006 that they relinquish their allocation of the Ontario quantity for 2007.
Remanufacturer's percentage share	(3) The percentage share of a remanufacturer is the higher of the percentages calculated under paragraphs (a) and (b): (a) the percentage calculated in accordance with the formula
(RBEV/TBEV) × 100
where RBEV is the highest volume of the remanufacturer's products that were exported from Ontario to the United States under export permits during a period of 12 consecutive months within the reference period, and TBEV is the total volume of the primary producers' and remanufacturers' products exported from Ontario to the United States under export permits during their respective best 12-month periods, excluding the volume of primary producers and remanufacturers who indicate in writing to the Minister before December 14, 2006 that they relinquish their allocation of the Ontario quantity for 2007; (b) the percentage calculated in accordance with the formula
(REO/TEO) × 100
where REO is the volume of the remanufacturer's products exported from Ontario to the United States under export permits during the reference period, and TEO is the total volume of the primary producers' and remanufacturers' products exported from Ontario to the United States under export permits during the reference period, excluding the volume of primary producers and remanufacturers who indicate in writing to the Minister before December 14, 2006 that they relinquish their allocation of the Ontario quantity for 2007.
PART 2 QUEBEC
Primary producers with an export history	5. (1) If some or all of a primary producer's products were exported from Quebec to the United States under export permits during the reference period and the primary producer applies for an export allocation, the primary producer must choose to receive an allocation of the Quebec quantity under the method described in section 6 (which is based on their historic export volume) or the method described in subsection 7(1) (which is based on their historic production volume).
Primary producers without an export history	(2) If none of a primary producer's products were exported from Quebec to the United States under export permits during the reference period and the primary producer produced Quebec softwood lumber products during the period beginning on January 1, 2003 and ending on December 31, 2005 and applies for an export allocation, the primary producer may only receive the allocation under the method described in subsection 7(1) (which is based on their historic production volume).
Remanufacturers	(3) If some or all of a remanufacturer's products were exported from Quebec to the United States under export permits during the reference period and the remanufacturer applies for an export allocation, the remanufacturer may only receive the allocation under the method described in section 9 (which is based on their historic export volume).
Allocation to primary producers — historic export volume	6. The allocation of the Quebec quantity to a primary producer that is based on their historic export volume is calculated in accordance with the formula
QQ × (PPE/TQE) × 94%
where QQ is the Quebec quantity; PPE is the volume of the primary producer's products exported from Quebec to the United States under export permits during the reference period; and TQE is the total volume of former softwood lumber products exported from Quebec to the United States under export permits during the reference period.
Allocation to primary producers — historic production volume	7. (1) The allocation of the Quebec quantity to a primary producer that is based on their historic production volume is calculated in accordance with the formula
RP × (PPPV/TPV)
where RP is the reserve pool calculated in accordance with section 8; PPPV is the volume of Quebec softwood lumber products that the primary producer produced during the period beginning on January 1, 2003 and ending on December 31, 2005; and TPV is the total volume of Quebec softwood lumber products produced during the period beginning on January 1, 2003 and ending on December 31, 2005 of all primary producers whose allocations are based on their historic production volume.
Records of production volume	(2) The volume of Quebec softwood lumber products produced by a primary producer is based on records provided, with the consent of the primary producer, by the Government of Quebec to the Government of Canada.
Reserve pool	8. (1) The reserve pool is calculated in accordance with the formula
A + B + C
where A is the volume of former softwood lumber products determined in accordance with subsection (2); B is the volume of former softwood lumber products determined in accordance with subsection (3); and C is the volume of former softwood lumber products determined in accordance with subsection (4).
Description of A	(2) The volume of former softwood lumber products for the description of A in subsection (1) is calculated in accordance with the formula
QQ × (TPPE/TQE) × 6%
where QQ is the Quebec quantity; TPPE is the total volume of primary producers' products that were exported from Quebec to the United States under export permits during the reference period in respect of primary producers who have chosen to receive an allocation of the Quebec quantity under the allocation method described in section 6; and TQE is the total volume of former softwood lumber products exported from Quebec to the United States under export permits during the reference period.
Description of B	(3) The volume of former softwood lumber products for the description of B in subsection (1) is calculated in accordance with the formula
QQ × (TPPEPV/TQE)
where QQ is the Quebec quantity; TPPEPV is the total volume of primary producers' products exported from Quebec to the United States under export permits during the reference period in respect of primary producers who have chosen to receive an allocation of the Quebec quantity under the allocation method described in subsection 7(1); and TQE is the total volume of former softwood lumber products exported from Quebec to the United States under export permits during the reference period.
Description of C	(4) The volume of former softwood lumber products for the description of C in subsection (1) is calculated in accordance with the formula
QQ × (TNPE/TQE)
where QQ is the Quebec quantity; TNPE is the total volume of primary producers' and remanufacturers' products exported from Quebec to the United States under export permits during the reference period in respect of primary producers and remanufacturers who do not apply for an export allocation before December 14, 2006; and TQE is the total volume of former softwood lumber products exported from Quebec to the United States under export permits during the reference period.
Allocation to remanufacturers	9. The allocation of the Quebec quantity to a remanufacturer that is based on their historic export volume is calculated in accordance with the formula
QQ × (RE/TQE)
where QQ is the Quebec quantity; RE is the volume of the remanufacturer's products exported from Quebec to the United States under export permits during the reference period; and TQE is the total volume of former softwood lumber products exported from Quebec to the United States under export permits during the reference period.
PART 3 MANITOBA
Allocation	10. The allocation of the Manitoba quantity to a primary producer or remanufacturer who applies for an export allocation is calculated in accordance with the formula
MQ × (EM/TEM)
where MQ is the Manitoba quantity; EM is the volume of the primary producer's or remanufacturer's products that were exported from Manitoba to the United States under export permits during the reference period; and TEM is the total volume of the primary producers' and remanufacturers' products exported from Manitoba to the United States under export permits during the reference period, excluding the volume of primary producers and remanufacturers who indicate in writing to the Minister before December 14, 2006 that they relinquish their allocation of the Manitoba quantity for 2007.
PART 4 SASKATCHEWAN
Allocation	11. The allocation of the Saskatchewan quantity to a primary producer or remanufacturer is based on the order of applying for the export allocation, with each applicant receiving the volume applied for until the Saskatchewan quantity is fully allocated.
PART 5 COMING INTO FORCE
October 12, 2006	12. This Order is deemed to have come into force on October 12, 2006.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Order.)

Description

On October 12, 2006, the Canada-United States Softwood Lumber Agreement entered into force. The Softwood Lumber Products Export Charge Act, 2006 (SLPECA) received Royal Assent on December 14, 2006, and implemented many of Canada's obligations under the Agreement. The Agreement requires Canada to implement a "border measure" respecting exports of softwood lumber to the United States. Under the SLPECA, the border measure takes one of two forms:

• Option A – an export charge;
• Option B – an export charge at a lower rate, with a restraint on the volume of exports.

The provinces of Ontario, Quebec, Manitoba and Saskatchewan elected to be subject to the Option B border measure. Pursuant to the Agreement, the Government of Canada was required to implement the Option B border measure effective January 1, 2007.

The Government of Canada's policy with respect to allocating export quotas of softwood lumber products first processed in Option B regions was communicated to exporters in letters dated December 14, 2006, and in Notice to Exporters Serial No. 147 published on the website of the Department of Foreign Affairs and International Trade on January 31, 2007. The Allocation Method Order – Softwood Lumber Products confirms the Government of Canada's policy with respect to allocations for 2007. It is made pursuant to the authority of the Minister of Foreign Affairs (the Minister) under paragraph 6.3(3)(a) of the Export and Import Permits Act (EIPA) and section 108 of the SLPECA.

Exports to the United States of softwood lumber first processed in Option B regions are subject to a monthly volume restraint pursuant to the Agreement. Subsection 6.3(2) of the EIPA authorizes the Minister to establish the volume of exports permitted from a region per month, termed the Regional Quota Volume (RQV). Subsection 6.3(3) provides authority for the Minister to establish a method for allocating the RQV among individual companies and to issue export allocations on a monthly basis.

In Ontario, Quebec and Manitoba, allocations are made on a company-specific basis to primary producers and remanufacturers of softwood lumber who applied for one. The allocation methods for Ontario and Manitoba are based solely on a company's historic exports volumes of softwood lumber to the United States, while the allocation method for Quebec is based on either a company's historic export or historic production volumes. For purposes of determining each company's historic export volumes to the United States, the Department of Foreign Affairs and International Trade used data collected from permits issued for softwood lumber exports pursuant to the EIPA covering a reference period of April 1, 2001, to December 31, 2005 (the reference period). Companies were given credit for all exports to the United States for which they were reported to be the primary producer or remanufacturer who processed that lumber. Further details on each allocation method are provided below.

Ontario

Each primary producer or remanufacturer is allocated a share of Ontario's monthly RQV based on the higher of: (1) its best 12-month period of exports divided by the total of the best 12-month period of exports for all primary producers and remanufacturers in the reference period; and (2) its total exports divided by exports for all primary producers and remanufacturers in the reference period.

Quebec

Each remanufacturer is allocated a share of Quebec's monthly RQV equivalent to its share of Quebec's historic exports to the United States during the reference period.

Primary producers whose softwood lumber products were exported from Quebec were given the option to receive an allocation based on either their historic exports to the United States or their historic production of softwood lumber. Each primary producer that chose the former option is allocated a share of Quebec's monthly RQV equivalent to 94% of its share of Quebec's historic exports to the United States.

Each primary producer who elected to receive an allocation based on its historic production and each primary producer whose softwood lumber products were not exported during the reference period is allocated a share of a "reserve pool" equal to its share of total softwood lumber products produced during the period of January 1, 2003, to December 31, 2005, by primary producers participating in this pool. Data collected by the Government of Quebec pursuant to its authority under Quebec's Forest Act (R.S.Q., c. F-4.1) was used for purposes of determining each company's historic production. The "reserve pool" is equal to the sum of 6% of the historic export shares of primary producers who elected to receive allocations based on their export history and 100% of the historic export shares for primary producers who elected the "reserve pool" and for primary producers and remanufacturers who did not apply for an export allocation.

Manitoba

Each primary producer or remanufacturer is allocated a share of Manitoba's monthly RQV equivalent to its share of Manitoba's historic exports volumes to the United States during the reference period.

Saskatchewan

Allocations are made to exporters in Saskatchewan on a first-come, first-served basis.

Alternatives

The Allocation Method Order – Softwood Lumber Products must be made by order.

Benefits and costs

The allocation methodologies are based on consultations with provincial governments and reflect the differing circumstances of the softwood lumber industry from region to region. Company-specific allocations were made for the provinces of Ontario, Quebec and Manitoba to avoid a potentially costly "race to the border" by exporters during times when the capacity to export is high compared to the volume of exports permitted under the Agreement. A first-come, first-served approach was adopted in Saskatchewan because this reduces the administrative burden for exporters in that province and the lack of capacity for the industry in that province to export at the present time precludes the need to ration allocations.

The allocation methodologies in Ontario and Quebec were chosen to facilitate increased utilization of export allocations in those provinces to take into account changes in their respective industries. In Quebec, many major primary producers of softwood lumber who are traditional exporters to the U.S. market have curtailed their operations in recent years, yet many smaller primary producers exist that have the capacity to export but did not necessarily have an export history. The creation of a "reserve pool" through which such companies could obtain an allocation was considered an effective means to provide these companies with access to the U.S. market. In Ontario, new productive capacity has come online in recent years. The allocation method in that province takes into account the needs of these facilities.

Consultation

The Government of Canada consulted with the governments of all of the provinces that elected the Option B border measure regarding specific allocation methodologies for their particular regions. In addition to consultations with provincial officials, federal officials met with many industry representatives and received numerous written submissions from companies from those provinces. These communications highlighted the divergent positions among industry stakeholders and informed the federal government's dialogue with provincial officials. The final recommendations provided to the Government of Canada by the governments of Ontario and Quebec reflected these federal-provincial discussions as well as feedback received by both levels of government from industry representatives.

In Ontario, companies that had started new production facilities in recent years favoured a longer reference period that included more recent data and an allocation method based on each company's best 12-month period of exports to the United States, as this would have led to a larger share of Ontario's allocation going to companies whose shipments had recently grown. Conversely, companies whose shipments had been relatively stable over the reference period expressed the view that the allocation should be based on the straight average over the entire period. The allocation method recommended by Ontario and promulgated by this Order reflects a balance between these two approaches.

In Quebec, there was considerable discussion regarding the creation and size of a "reserve pool" that would allow the entry of new firms into the export market by making allocations to companies that had little or no history of exports to the United States. Many of the major softwood lumber producers in the province who were the traditional exporters of Quebec lumber opposed the creation of such a pool. However, many smaller companies advocated for this pool claiming that they had the capacity to export but would not have sufficient access if their allocations were based solely on historic exports. As was the case in Ontario, the final recommendation from Quebec and promulgated in this Order reflected a balance between these competing interests and called for the creation of a modest reserve pool.

The allocation methods for Manitoba and Saskatchewan reflect the advice provided by those provinces following discussions among federal and provincial officials.

Compliance and enforcement

The Department of Foreign Affairs and International Trade is responsible for administering and enforcing the Order. Provision of false or misleading information to obtain an export allocation is an offence and may lead to prosecution under the EIPA.

Contact

Geoff White
Director
Softwood Lumber Controls Division
Export and Import Controls Bureau
Department of Foreign Affairs and International Trade
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 613-996-0934
Fax: 613-944-0058

Footnote a

S.C. 2006, c. 13, s. 111

Footnote b

S.C. 2006, c. 13

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