S ince the 1980s, there have been five major disputes (so-called lumber wars) between the United States and Canada, interspersed by three different trade agreements. The latest dispute, Lumber V, started after the expiration of the 2006 Softwood Lumber Agreement (SLA) in October 2015. This report provides background information on the dispute, summarizes the key issues leading to the tensions between the United States and Canada over softwood lumber, and examines current developments in Lumber V. 

	Background

Softwood lumber, for purposes of this report, is lumber produced from conifer trees. Alleged Subsidies to Canadian Lumber Producers

The main basis of the United States-Canada softwood lumber dispute is the allegation that Canadian lumber production is subsidized by the Canadian government. U.S. lumber producers allege that these subsidies give Canadian lumber producers an unfair advantage in the U.S. market, causing injury to U.S. producers. Different Land Ownership and Management Regimes

The United States and Canada both have vast forest resources, but the ownership patterns, development pressures, and forest management policies in each country are very different. In Canada, about 94% of the timberlands are "crown lands" owned and administered by the federal and provincial governments. Different Fee Systems

In large part due to the different land management regimes in the two countries, the United States and Canada each rely on different price allocation systems to determine the cost of lumber. There is generally a flat annual fee for maintaining the leases and a stumpage fee—a per-unit-of-volume fee charged for the right to harvest the trees—for the timber harvested. Comparing U.S. and Canadian Stumpage Fees

Allegations that Canadian lumber production is subsidized by the Canadian government rest in part on the claims that Canadian stumpage prices—which are set administratively—are lower than the market-determined stumpage prices in the United States. Adjusting for these differences is difficult, under the best of circumstances. History of the Dispute

The dispute between the United States and Canada regarding softwood lumber trade dates back to the 1930s, but the so-called lumber wars began in the 1980s when the United States first considered trade protection measures. The Canadian government and Canadian lumber producers generally have supported free trade but have been amenable to trade agreements that ensure access to the U.S. market. However, Commerce announced on November 2, 2017, that the two parties were unable to reach an agreement and announced the final determinations (see below). Litigation

			U.S. Trade Remedy Action

The Committee Overseeing Action for Lumber International Trade Investigations or Negotiations (COALITION) petitioned the International Trade Administration (ITA) of the Department of Commerce and the U.S. International Trade Commission (ITC) to initiate antidumping (AD) and countervailing duty (CVD) proceedings against Canadian softwood lumber on November 25, 2016 (see Table 2 ). Dumping margins were assessed for four specific firms at 3.20% to 8.89%, with an all-other firm rate of 6.58%. The final subsidy determinations were assessed at 3.34%-18.19%, depending on the firm, with a 14.25% all-other rate. On December 7, 2017, ITC determined that practices found by ITA caused "material injury," to the U.S. lumber industry. Issues for Congress

While the softwood lumber litigation plays out, Congress may seek to influence any settlement of the softwood lumber dispute through potential renegotiation of the North American Free Trade Agreement (NAFTA). However, under Trade Promotion Authority (TPA), the President must give advanced notice to Congress for any renegotiation and must consult with Congress before and during the negotiations. U.S. lumber producers assert that they have been injured by Canadian subsidies that have given Canadian lumber producers an unfair advantage in selling lumber in the U.S. market. These contradictory results may be explained by the adjustments made to account for differences in timber measurement systems (one cubic meter of Canadian logs yields 125–275 board feet of U.S. lumber, depending on the logs' diameters); in tree species, sizes, and grades; and in requirements imposed on the timber purchaser (e.g., reforestation and road construction), among other factors. Other factors might also be important in the dispute over lumber imports from Canada.
Softwood lumber imports from Canada have been a persistent concern for Congress for decades. Canada is an important trading partner for the United States, but lumber production is a significant industry in many states. U.S. lumber producers claim they are at an unfair competitive disadvantage in the domestic market against Canadian lumber producers because of Canada's timber pricing policies. This has resulted in five major disputes (so-called lumber wars) between the United States and Canada since the 1980s.
The current dispute (Lumber V) started when the 2006 Softwood Lumber Agreement (SLA) expired on October 12, 2015. Under that agreement, Canadian softwood lumber shipped to the United States was subject to export charges and quota limitations when the price of U.S. softwood products fell below a certain level. After a year-long grace period, a coalition of U.S. lumber producers filed trade remedy petitions on November 25, 2016, which claimed that Canadian firms dump lumber in the U.S. market and that Canadian provincial forestry policies subsidize Canadian lumber production. These petitions subsequently were accepted by the two agencies that administer the trade remedy process: the International Trade Commission (ITC) and the International Trade Administration (ITA).
On December 7, 2017, the ITC determined that imports of softwood lumber, previously determined to be dumped and subsidized by ITA, caused material injury to U.S. producers. This means that ITA's final duties in the anti-dumping (AD) and countervailing duty (CVD) proceedings, announced on November 2, 2017, can be imposed on affected Canadian lumber. ITA found subsidization of the Canadian industry and determined a subsidy margin of 3.34%-18.19% on Canadian lumber, depending on the firm. ITA found dumping margins of 3.20% to 8.89%, also firm dependent. Canada is challenging these trade remedy decisions at World Trade Organization and North American Free Trade Agreement tribunals.
Tension between the United States and Canada over the softwood lumber trade has been persistent and may be inevitable. Both countries have extensive forest resources, but they have quite different population levels and development pressures. Vast stretches of Canada are still largely undeveloped, whereas relatively fewer areas in the United States (outside Alaska) remain undeveloped. These differences have contributed to different forest management policies.
For decades, U.S. lumber producers have argued that they have been injured by subsidies given to their Canadian competitors in the form of lost market share and lost revenue. In the United States, the majority of the timberlands are privately owned; private markets dominate the allocation and pricing of timber, although federally owned forests are regionally significant. In Canada, forests are largely owned by the provincial governments and leased to private firms. The provinces establish the price of timber through a stumpage fee, a per unit volume fee charged for the right to harvest trees.
U.S. lumber producers argue that the stumpage fees charged by the Canadian provinces are subsidized, or priced at less than their market value, providing an unfair competitive advantage in supplying the U.S. lumber market. The Canadian provinces and lumber producers dispute the subsidy allegations. Directly comparing Canadian and U.S. lumber prices is difficult and often inconclusive, however, due to major differences in tree species, sizes, and grades; measurement systems; requirements for harvesters; environmental protection; and other factors.
The softwood lumber trade between the United States and Canada is of interest to Congress due to the controversy between Canadian and U.S. lumber producers and the larger implications it might have on trade between the two countries. The potential renegotiation of the North American Free Trade Agreement (NAFTA) may provide Congress an opportunity to weigh in on this issue, given its constitutional authority over trade policy, as well as authority granted under the 2015 Trade Promotion Authority (TPA). Congress may consider legislation or conduct oversight on these issues.