September 2010

The information in this notice sets out how the Canada Revenue Agency (CRA) administers the Softwood Lumber Products Export Charge Act, 2006 (the Act). It is provided for reference purposes only and does not replace the Act or its regulations. Should there be any discrepancy between the information in this notice and that contained in the Act or its regulations, the legislative provisions apply. As the information in this publication may not completely address your particular situation, you may wish to refer to the Act or regulations, or call the number at the end of this document for additional information.

Overview

In accordance with Annex 7C of the Softwood Lumber Agreement, 2006 (the Agreement), Canada has agreed to provide the United States with the weighted-average yield loss percentage used to determine the export price for softwood lumber products incorporated into remanufactured softwood lumber products exported to the United States by independent remanufacturers. The weighted average is defined as the average of the averages reported by exporting independent remanufacturers that use the yield loss percentage to determine the export price. The calculation is done each calendar quarter for each region that had exports to the U.S. in that quarter.

This notice is provided to assist independent remanufacturers that use the yield loss percentage method to calculate the export price and the reporting of that percentage to the Canada Revenue Agency (CRA) on their monthly returns.

Calculation of yield loss percentage

The yield loss percentage should be calculated in the following manner:

[1 − (Total outputs of all remanufactured SLP* ÷ Total inputs of all SL)] × 100

* Softwood Lumber Product (SLP)

Units of measurement

The units of measurement for the numerator and the denominator used in the calculation must be the same. For example, if thousand board feet (mbf) is used for the denominator (inputs), mbf must also be the unit of measurement for the numerator (outputs).

Conversion from board feet to cubic metres or square metres should follow the rule established in section 3 of the Softwood Lumber Products Export Charge Act, 2006 (the Act). Section 2 of the Act defines "board foot" and includes a conversion of thousand board feet of lumber to cubic metres and square metres of lumber.

Total output of remanufactured SLP is the sum of all finished remanufactured products made from softwood lumber. This should include both primary and secondary products produced by the independent remanufacturer for sale in their domestic and international markets.

Outputs encompass all products made from softwood lumber that are sold to the independent remanufacturer's customers as trade goods. Not to be included is waste such as sawdust or wood chips, even if the independent remanufacturer sells the waste in order to recover costs.

Total inputs of SL is the sum of all softwood lumber purchased in the month to be remanufactured into finished goods for all softwood lumber production lines for that month. An adjustment for work in progress (WIP) is discussed below.

WIP of inputs of SL

At the end of the month, there may be softwood lumber inputs at various stages of remanufacture. Each month, an adjustment should be made to account forinput units that have not been processed into finished trade goods.

The input adjustment is the estimated number of input units introduced at the beginning of the remanufacturing process, remaining on the production line at the end of the month, irrespective of the degree of transformation to a finished trade good.

The WIP adjustment is used to determine the total input of SL used to produce the completely remanufactured SLP in that month and is calculated as:

WIP from the end of previous month + total new inputs of SL in the current month - WIP at end of the current month

When is the yield loss percentage calculated and reported?

The yield loss percentage is calculated by independent remanufacturers that use the percentage to determine their export price. The percentage is reported in box 6 (Yield loss percentage) on page 1 of Form B275, Softwood Lumber Products Export Charge Return for each month that there are exports of softwood lumber product to the United States.

All technical publications on the softwood lumber products export charge are available on the CRA Web site at www.cra.gc.ca/softwood.