Vol. 143, No. 25 — December 9, 2009

Registration

SOR/2009-320 November 30, 2009

EXPORT AND IMPORT PERMITS ACT

Allocation Method Order (2010) — 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(see footnote b), hereby makes the annexed Allocation Method Order (2010) – Softwood Lumber Products.

Ottawa, November 30, 2009

CANNON
Minister of Foreign Affairs

ALLOCATION METHOD ORDER (2010) – SOFTWOOD LUMBER PRODUCTS

Definitions

1. The following definitions apply in this Order.

“Act”
« Loi »

“Act” means the Export and Import Permits Act.

“exported”
« exporté »

“exported” has the meaning set out in section 6.4 of the Act.

“Manitoba quantity”
« quantité pour le Manitoba »

“Manitoba quantity” means the quantity of 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 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 produces softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produces Quebec softwood lumber products from softwood sawlogs.

“primary producer’s products”
« produits d’une entreprise de première transformation »

“primary producer’s products” means the softwood lumber products that a primary producer produces and that are not remanufactured in Canada.

“Quebec quantity”
« quantité pour le Québec »

“Quebec quantity” means the quantity of 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 November 1, 2006 and ending on October 31, 2009.

“remanufacturer”
« entreprise de seconde transformation »

“remanufacturer” means a person who remanufactures — within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006 — softwood lumber products.

“remanufacturer’s products”
« produits d’une entreprise de seconde transformation »

“remanufacturer’s products” means the softwood lumber products that a remanufacturer remanufactures and that are not further remanufactured in Canada.

“Saskatchewan quantity”
« quantité pour la Saskatchewan »

“Saskatchewan quantity” means the quantity of softwood lumber products that may be exported from Saskatchewan to the United States during a month under subsection 6.3(2) of the Act.

“softwood lumber products”
« produits de bois d’œuvre »

“softwood lumber products” means the products referred to in item 5104, Group 5 of the schedule to the Export Control List.

GENERAL

Application

2. This Order establishes the method for allocating the quantity of softwood lumber products that may be exported during a month from Ontario, Quebec, Manitoba and Saskatchewan in 2010 for the purposes of paragraph 6.3(3)(a) of the Act.

Relinquishing an export allocation

3. For the purposes of this Order, a primary producer or remanufacturer relinquishes their export allocation for 2010 by so informing the Minister in writing by December 11, 2009.

Transfer of export allocation

4. If a primary producer or remanufacturer transfers, with the consent of the Minister under subsection 6.3(4) of the Act, a portion of the export allocation issued to it by the Minister for a month, that portion is deemed to be included in the volume of the primary producer’s or remanufacturer’s products that were exported in that month to the United States under export permits, and not in the volume of the transferee, so long as

(a) the portion transferred includes a corresponding volume of products; or

(b) the total of the portion transferred during the month that does not include products does not exceed 15% of the volume of the primary producer’s or remanufacturer’s export allocation for the month.

ONTARIO

Allocation

5. 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 × (EO/TEO)

where

OQ is the Ontario quantity;

EO is the volume of the primary producer’s or remanufacturer’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 primary producers’ and remanufacturers’ products that were exported from Ontario to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2010.

QUEBEC

Primary producers with an export history

6. (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 calculated in accordance with the formula set out in section 7(which is based on their historic export volume) or the formula set out in subsection 8(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 if the primary producer produced Quebec softwood lumber products during the period beginning on January 1, 2006 and ending on December 31, 2008 and it applies for an export allocation, the primary producer may only receive the allocation calculated in accordance with the formula set out in subsection 8(1) (which is based on its 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 calculated in accordance with the formula set out in section 11 (which is based on its historic export volume).

Allocation to primary producers — historic export volume

7. The allocation of the Quebec quantity to a primary producer that is based on its historic export volume is calculated in accordance with the formula

(PPE/TPPEH) × {[QQ × (TPPE/TEQ) × 96%] + RNA}

where

PPE is the volume of the primary producer’s products that were exported from Quebec to the United States under export permits during the reference period;

TPPEH 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 export allocations based on historic export volume, excluding the volume of products of primary producers who relinquish their export allocations for 2010;

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, excluding the volume of products of primary producers who relinquish their export allocations for 2010;

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2010; and

RNA is the residual non-allocated quantity of the reserve pool calculated under section 10.

Allocation to primary producers — historic production volume

8. (1) The allocation of the Quebec quantity to a primary producer that is based on its historic production volume is calculated in accordance with the formula

RP × (PPPV/TPV)

where

RP is the reserve pool calculated under section 9;

PPPV is the volume of Quebec softwood lumber products that the primary producer produced during the period beginning on January 1, 2006 and ending on December 31, 2008; and

TPV is the total volume of Quebec softwood lumber products produced during the same period by primary producers whose allocations are based on their historic production volume.

Maximum allocation

(2) The allocation may not exceed 40% of the primary producer’s average monthly volume of Quebec softwood lumber products produced during the period beginning on January 1, 2006 and ending on December 31, 2008.

Records of production volumes

(3) 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

9. The reserve pool is calculated in accordance with the formula

QQ × (TPPE/TEQ) × 4%

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, excluding the volume of products of primary producers who relinquish their export allocations for 2010; and

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2010.

Residual non-allocated quantity

10. The residual non-allocated quantity of the reserve pool is calculated in accordance with the formula

RP – AP

where

RP is the reserve pool; and

AP is the total volume of softwood lumber products allocated to primary producers calculated under section 8.

Allocation to remanufacturers

11. The allocation of the Quebec quantity to a remanufacturer that is based on its historic export volume is calculated in accordance with the formula

QQ × (RE/TEQ)

where

QQ is the Quebec quantity;

RE is the volume of the remanufacturer’s products that were exported from Quebec to the United States under export permits during the reference period; and

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2010.

MANITOBA

Allocation

12. 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 primary producers’ and remanufacturers’ products that were exported from Manitoba to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2010.

SASKATCHEWAN

Allocation

13. The allocation of the Saskatchewan quantity to a primary producer or remanufacturer who applies for an export allocation is calculated in accordance with the formula

SQ × (ES/TSQ)

where

SQ is the Saskatchewan quantity;

ES is the volume of the primary producer’s or remanufacturer’s products that were exported from Saskatchewan to the United States under export permits during the reference period; and

TSQ is the total of the Saskatchewan quantities for the reference period.

Allocation of remainder

14. The allocation of the remainder of the Saskatchewan quantity is based on the order of receipt of applications for an export allocation of the remainder, with each applicant receiving the volume applied for until the Saskatchewan quantity is fully allocated.

COMING INTO FORCE

Registration

15. This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Executive summary

Issue

On October 12, 2006, the Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (the “SLA”) entered into force, which entailed consequential amendments to the Export and Import Permits Act (the “EIPA”) and its related regulations to enable Canada to comply with many of its obligations under the SLA. The SLA requires Canada to implement an “export measure” respecting exports of softwood lumber products to the United States. The export measure may take one of two forms:

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

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

Pursuant to subsection 6.3(2) of the EIPA, the Minister of Foreign Affairs (the “Minister”) has the authority to determine the quantity of softwood lumber products that are exported from a region during a month, otherwise known as the Regional Quota Volume (the “RQV”). Furthermore, pursuant to subsection 6.3(3) of the EIPA, the Minister has the authority to establish a method for allocating the RQV among companies that have registered in accordance with section 23 of Softwood Lumber Products Export ChargeAct, 2006 and to issue export allocations to these companies on a monthly basis. An export allocation may be used only for the purpose of obtaining a permit to export to the United States certain softwood lumber products first manufactured in Quebec, Ontario, Manitoba or Saskatchewan.

The Government’s initial policy that established eligibility criteria for export allocations respecting softwood lumber products first processed in Option B regions for 2007 was communicated to exporters in letters dated December 14, 2006, and in Notice to Exporters No. 147, published on the Web site of the Department of Foreign Affairs and International Trade on January 31, 2007. The Minister enacted the Allocation Method Order — Softwood Lumber Products SOR/2007-166 (published in the Canada Gazette, Part II, Volume 141, No. 15 on July 25, 2007), which implemented the Government of Canada’s policy with respect to allocations for 2007. Subsequently, the Minister enacted the Allocation Method Order (2008) — Softwood Lumber Products SOR/2007-305 (published in the Canada Gazette, Part II, Volume 141, No. 26 on December 26, 2007), with respect to allocations for 2008, and the Allocation Method Order (2009) — Softwood Lumber Products SOR/2009-10 (published in the Canada Gazette, Part II, Volume 143, No. 1 on January 7, 2009), with respect to allocations for 2009. The Minister may make an order to establish a method to allocate the quantity of softwood lumber products that may be exported during a month, for the period of January 1, 2010 to December 31, 2010.

Objectives

This regulation establishes the method for allocating to individual companies, the quantity of softwood lumber products that may be exported during a month from Quebec, Ontario, Manitoba and Saskatchewan for the period of January 1, 2010 to December 31, 2010.

Description

This regulation provides that, for the period of January 1, 2010 to December 31, 2010, export allocations will be made on a company-specific basis to eligible primary producers and remanufacturers of softwood lumber who applied for allocations. The allocation methods for Ontario and Manitoba are based solely on a company’s historic export volumes of softwood lumber to the United States; the allocation method for Quebec is based upon a company’s choice between two options, namely either historic export volumes or historic production volumes; and the allocation method for Saskatchewan is based on either a company’s historic export volumes or a first-come first-served basis.

For the purpose of determining each applicant’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, subject to any necessary adjustments to account for transfers as set out in section 4 of the Order. For details, see section 7.0, “Impact of Transfers on Future Years Export History Calculations” in Notice to Exporters, serial no. 158, covering the reference period of November 1, 2006 to October 31, 2009 (the “Reference Period”).

For the purpose of determining each Quebec applicant’s historic production volumes, the Department of Foreign Affairs and International Trade will use data collected by the Government of Quebec pursuant to its authority under the Quebec’s Forest Act (R.S.Q., c. F-4.1), during the period beginning on January 1, 2006 and ending on December 31, 2008.

Applicants are 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 eligible primary producer or remanufacturer is allocated a share of Ontario’s monthly RQV equivalent to its share of Ontario’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

Quebec

Each eligible remanufacturer is allocated a share of Quebec’s monthly RQV equivalent to its share of Quebec’s historic export volumes to the United States during the Reference Period.

Primary producers whose softwood lumber products were exported from Quebec are given the option to receive an allocation based on either their historic export volumes to the United States, subject to any necessary adjustments to account for transfers, or their historic production volumes of softwood lumber products.

In general terms, each primary producer that chooses the former option receives an allocation that is the product of the share set out in (a) times the “amount” set out in (b):

(a) the primary producer’s share of all primary producers’ historic export volumes from Quebec to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period;

(b) the “amount” is 96% times all primary producers’ share of Quebec’s total historic exports to the United States during the Reference Period, plus the “residual non-allocated quantity” of the “reserve pool” (described in the next paragraph); this “residual non-allocated quantity” is the amount of the “reserve pool” less the total volume of softwood lumber products allocated to primary producers based on their historic production volumes.

Each primary producer who elects to receive an allocation based on its historic production volumes, and each primary producer whose softwood lumber products were not exported during the Reference Period, is allocated a share of the “reserve pool” that is equal to its share of the total softwood lumber products produced during the period of January 1, 2006 to December 31, 2008 by primary producers participating in this pool. The “reserve pool” is 4% times the sum of the primary producers’ shares of Quebec’s total historic export volumes to the United States during the Reference Period.

The allocation based on historic production volumes may not exceed 40% of the primary producer’s average monthly volume of Quebec softwood lumber products produced during the period of January 1, 2006 to December 31, 2008.

Manitoba

Each eligible primary producer or remanufacturer is allocated a share of Manitoba’s monthly RQV equivalent to its share of Manitoba’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

Saskatchewan

Each eligible primary producer or remanufacturer is allocated a share of Saskatchewan’s monthly RQV equivalent to its share of Saskatchewan’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

The “residual pool,” equal to the percentage of Saskatchewan’s monthly RQV not allocated during a month, is allocated on a first-come first-served basis to each eligible primary producer or remanufacturer that has exhausted its share during a given month or to primary producers or remanufacturers that have not exported to the United States during the Reference Period.

Regulatory and non-regulatory options considered

The SLA requires Canada to impose volume restraints on softwood lumber product exports from Option B regions (i.e. Quebec, Ontario, Manitoba and Saskatchewan). The certainty and transparency of a regulation provides the optimal environment for the industry to be able to develop their business plans for 2010.

Benefits and costs

Softwood lumber is one of Canada’s largest exports to the United States, with 21.5 billion board feet (BBF) of lumber shipped in 2005 alone (20.2 BBF in 2006; 16.7 BBF in 2007; 11.72 BBF in 2008). Exports of softwood lumber products are valued at nearly $10 billion annually ($8.5 billion in 2005; $7.3 billion in 2006; $5.6 billion in 2007; $2.7 billion in 2008) and constitute an important element of the largest trading relationship in the world. Canada may enact the Order under section 6.3 of the EIPA.

The costs associated with this allocation method order for the government are limited to the administrative costs of making the regulation. Since the current allocation method order only applies to 2009, this regulation is needed to ensure that companies are able to develop their business plans for 2010.

Rationale

These allocation methodologies were developed following extensive consultations with provincial governments and industry stakeholders, and reflect the differing circumstances of the softwood lumber industry from region to region. In order to take into account the current state of the softwood lumber industry, and the views of various stakeholders, a 36-month reference period of November 1, 2006 to October 31, 2009 is used in the allocation methodologies for the different Option B regions.

Consultation

The Government of Canada held consultation meetings with industry representatives and governments of the provinces that elected the Option B export measure, regarding specific allocation methodologies for their particular provinces. In addition, further input was received from stakeholders following consultation meetings.

Industry representatives expressed concerns with the current state of the softwood lumber industry, their declining exports to the Unites States and the negative impact this will have on their shares of RQV for the year 2010 (usually based on a company’s export history).

The allocation methods proposed for export allocations respecting softwood lumber exports from Quebec, Ontario, Manitoba and Saskatchewan reflect the advice provided by those provinces following exchanges between federal and provincial officials.

Ontario

Companies have expressed different views with respect to the reference period to be used in this allocation method order. While some companies suggested a 36-month reference period beginning November 1, 2006 to October 31, 2009, others preferred to use the same reference period as was used in the Allocation Method Order (2008) — Softwood Lumber Products, which was from January 1, 2007 to October 31, 2007.

The Government of Ontario, as well as many companies in Ontario, support the 36-month reference period beginning November 1, 2006 to October 31, 2009.

Quebec

The Government of Quebec and some industry stakeholders proposed that the reference period in the allocation methodology be altered to November 1, 2006 to October 31, 2009.

Some industry representatives expressed their concerns in regard to the proportions existing between the “historic pool” (94%) and the “reserve pool” (6%). Most stakeholders stated that they would like the “reserve pool” to be considerably reduced.

Manitoba

The Government of Manitoba and industry representatives support the change to a 36-month reference period beginning on November 1, 2006 and ending on October 31, 2009.

Saskatchewan

The Government of Saskatchewan supports the current allocation methodology, which first allocates quota to companies based on their export histories, and then allocates the remaining balance on a first-come first-served basis. The only change in the methodology is the move to a 36-month reference period beginning on November 1, 2006 and ending on October 31, 2009.

Implementation, enforcement and service standards

The Export and Import Controls Bureau (EICB) of the Department of Foreign Affairs and International Trade is responsible for administering and enforcing the allocation method orders with respect to softwood lumber products. Providing false or misleading information in an application to obtain an export allocation is an offence and may lead to prosecution under the Export and Import Permits Act. The EIPA requires that records be kept and retained until the expiry of six years after the end of the year to which they relate, or for any other period that may otherwise be prescribed by regulation. The EICB conducts periodic audits to ensure that the conditions and requirements for receiving export allocations are respected.

This regulation will be binding with respect to export allocations issued by the Minister of Foreign Affairs from January 1, 2010 to December 31, 2010. A Notice to Exporters communicating the Government’s practices and procedures in this regard will be published on the Department of Foreign Affairs and International Trade’s Web site.

Performance measurement and evaluation

This regulation includes formulae that are used on a regular basis. Results are continuously monitored. No other performance measurement or evaluation plans are necessary.

Contact

John Drummond
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: 613-944-8950

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

Footnote b
R.S., c. E-19

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