Canada breached softwood lumber agreement: ruling

Sawmills in four provinces have been ordered to pay an additional 10 per cent export charge in a softwood lumber ruling made by an international arbitration tribunal.

The London Court of International Arbitrations ruled on Thursday that Canada breached the softwood lumber agreement by failing to calculate quotas properly during the first six months of 2007.

Mills in Ontario, Quebec, Manitoba and Saskatchewan must now pay an additional 10 per cent export charge on softwood lumber shipments until $68.26 million has been collected, under the ruling.

The decision cannot be appealed.

"We are pleased with the tribunal's decision," said Peter Allgeier, acting representative in the U.S. Trade Representative Office. "This dispute settlement proceeding is now at an end. We look forward to Canada working quickly to cure the breach."

The 2006 softwood lumber agreement ended a contentious trade dispute between Canada and the U.S. The agreement runs for seven years and can be extended by two additional years.

In the deal, Canada agreed to impose taxes and volume caps on exports to the U.S. when the price of lumber is below $355 US per thousand board feet.

The measure becomes more stringent as the market price of lumber falls. Canadian lumber exports, however, are unrestricted when the monthly price is about $355.

The U.S. filed a complaint that mills in the four provinces had underpaid taxes in the first half of 2007, while Canada argued that it had corrected the breach and the mills should not be penalized.

30 days to fix breach

Thursday's ruling does not apply to Alberta and B.C., because mills in those provinces pay a higher rate of tax.

Canada has 30 days to fix the breach in the other four provinces.

The U.S. Coalition for Fair Lumber Imports issued a release on Thursday applauding the ruling and indicating that it expects Canada to take action within the given month.

"U.S. companies and workers should not be forced to suffer additional harm in these difficult times as Canada skirts its trade agreement obligations," said coalition chairman Steve Swanson.

Swanson added that "significant [softwood lumber agreement] compliance problems remain."

Washington is also challenging programs for softwood lumber producers in Quebec and Ontario that it alleges violate the agreement. A decision in that arbitration is expected before the end of the year.