February 2011

Background

Under the Softwood Lumber Agreement, 2006 , Canada is required to impose Export Measures (i.e., export charges and volume limitations) on shipments of softwood lumber products to the U.S.

On January 18, 2008, the U.S. submitted a request for arbitration to the London Court of International Arbitration (LCIA) requesting a review of various benefit programs established by the Ontario and Quebec governments for exporters of Canadian softwood lumber products. Of particular concern to the U.S. were six programs, which provided grants, loans, loan guarantees, tax credits and other financial incentives. The U.S. contended that, by providing such benefits, Canada had violated its commitments under the Softwood Lumber Agreement, 2006, since they reduce or offset the Export Measures.

Proposed implementation of the additional export charge

The Government of Canada has announced its intention to amend the Act to include an additional export charge for Ontario and Quebec regions, effective March 1, 2011.

The proposed amendments require all exporters to the U.S. of softwood lumber products having a region of origin of Ontario to pay an additional export charge of 0.1% and those having a region of origin of Quebec to pay an additional export charge of 2.6%. The CRA will collect the additional export charge, remitted on a voluntary basis, until such time as amendments to the Act become law (i.e., receive Royal Assent).

If these amendments become law, they will apply as of March 1, 2011. Therefore, exporters who choose not to remit the additional export charges on a voluntary basis will be liable for the charge amounts effective March 1, 2011 including interest on amounts owing.

Calculating and reporting the additional export charge

Pursuant to section 12 of the Act, when softwood lumber products are exported to the U.S. from a region in a particular month, the amount of the charge is the amount calculated by applying the rate for that month to the export price of the products.

The amendments to the Act require that, where the region of origin of the exported softwood lumber product is Ontario, the charge rate applicable effective March 1, 2011 would be equal to the rate applicable for that month, plus 0.1%, plus the additional 10% export charge imposed as of September 1, 2010. Similarly, where the region of origin is Quebec, the charge rate applicable effective March 1, 2011 would be the rate applicable for that month, plus 2.6%, plus the additional 10% export charge imposed as of September 1, 2010.

For example, where the export charge rate applicable for a month is 5%, exports of softwood lumber products having a region of origin of Ontario would be subject to a total charge rate of 15.1%, which is the sum of the charge rates of 5% + 0.1% + 10%. Similarly, where the export charge rate applicable for a month is 5%, exports of softwood lumber products having a region of origin of Quebec would be subject to a total charge rate of 17.6% for that month, which is the sum of the charge rates of 5% + 2.6% + 10%.

For more information on calculating the export price, refer to Softwood Lumber Products Export Charge Notice SWLN3, Calculation of Export Price .

Remitting the export charge payable

Pursuant to section 26 of the Act, exporters are required to calculate the total amount of the charge payable each month and pay this amount at the end of the following month.

Enquiries

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