THUNDER BAY – It seems that both Ontario and the American based Softwood Lumber Coalition are pleased by today’s decision by the LCIA over charges that Canada was allowing unfair subsidies to the softwood lumber industry. “By providing new subsidies, Canada knowingly violated the terms of the lumber trade agreement to provide an unfair advantage to Canadian producers in this very challenging market,” said Steve Swanson, Chairman of the Coalition and President of the family-run Swanson Group in Oregon. “The remedy prescribed by the LCIA will help bring about a more level playing field for U.S. manufacturers, millworkers, and private forest landowners,” Swanson added.
“Ontario is pleased with today’s arbitration decision. We fought hard to defend Ontario’s programs and clearly the tribunal agreed that they provided no significant threat to U.S. producers. We look forward to a prosperous future for the sector,” stated Michael Gravelle, the Minister of Northern Development, Mines and Forestry.
Today’s decision is the second consecutive ruling by an LCIA Tribunal that Canada has violated the 2006 Softwood Lumber Agreement. In 2009, another LCIA Tribunal agreed with the United States that Quebec, Ontario, Manitoba, and Saskatchewan had exceeded quota requirements and ordered a 10% penalty export tax on lumber shipments from those provinces until C$68.26 million is collected.
LCIA Tribunals are comprised of experienced international commercial arbitrators who may not be citizens or residents of the United States or Canada. On January 18, the United States formally requested a third LCIA arbitration regarding a long-standing dispute over misgrading and underpricing of timber in the Interior region of British Columbia. The members of the LCIA Tribunal that will hear that claim will be named over the next few weeks.
The SLA entered into force in October 2006. Under the agreement, Canada collects export taxes on shipments of softwood lumber to the United States when lumber prices fall below certain levels. In return for Canada’s commitment to collect these export taxes, the Coalition agreed to settle outstanding trade actions it had brought against unfair Canadian lumber subsidies and to refrain from pursuing such actions while the SLA is in place. The agreement also prohibits the Canadian federal and provincial governments from circumventing these export taxes by providing subsidies to Canadian softwood lumber producers in excess of those in existence on July 1, 2006. Otherwise, Canada would be simply collecting the export taxes with one hand and giving them back to the lumber producers with the other hand – effectively circumventing the export tax requirements.
The Ontario Government is happy with a decision on softwood lumber brought down today. The international tribunal’s decision to limit an additional export tax on Ontario softwood lumber to only one-tenth of a per cent (0.1 per cent) is cause for relief. The decision is dramatically lower than the 20 per cent that the United States had originally requested. The tribunal rejected many of the U.S. claims, and found that Ontario’s forestry programs had no significant adverse impact on U.S. producers.
A London Court of International Arbitration Tribunal operating under the dispute settlement provisions of the 2006 Softwood Lumber Agreement (SLA) ruled the additional tax will be added to softwood lumber exports from Ontario. The U.S. had claimed a violation of the SLA because Ontario implemented certain pre-existing forest sector programs that took the form of grants, loan guarantees or other assistance.