The United States-Canada Softwood Lumber Agreement (2006 SLA), which entered into force with amendments on October 12, 2006, establishes Canadian export charges, with the level generally depending on average lumber prices, except for lumber from logs harvested in the Yukon, Northwest Territories, Nunavut, and Atlantic Provinces. As required under the 2006 SLA, the United States has revoked its antidumping (AD) and countervailing duty (CVD) orders on softwood lumber, and 80% of the estimated duties collected are being returned to importers of record. Concerns among U.S. lumber producers about softwood lumber imports from Canada have been raised for decades; the current dispute has persisted for 25 years. U.S. producers argue that they have been harmed by unfair competition, which they assert results from subsidies to Canadian producers, primarily in the form of low provincial stumpage fees (fees for the right to harvest trees from province-owned timberlands) and Canadian restrictions on log exports. In 1986, the U.S. lumber industry filed a petition for another CVD investigation. On December 30, 1986, the day before the final DOC subsidy determination was to be issued, the United States and Canada signed a memorandum of understanding (MOU) with Canada imposing a 15% tax on lumber exported to the United States, to be replaced by higher stumpage fees within five years. The 1996 SLA was effective through March 31, 2001. Industry Analysis: Subsidies and Injury

Annual Canadian lumber imports have risen from less than 3 billion board feet (BBF), about 7% of the U.S. market, in the early 1950s to more than 18 BBF, more than a third of the U.S. market, since the late 1990s. U.S. lumber producers argue that subsidies to Canadian producers give them an unfair advantage in supplying the U.S. market and that this has injured U.S. producers. This contrasts with the U.S. situation, where 42% of the forests are publicly owned and where public timber is typically sold in competitive auctions; thus, much of the timber in the United States is sold by public and private landowners at market prices. U.S. homebuilders and other lumber users counter that Canadian lumber is essential to meeting domestic demand, and argue for unrestricted imports. The DOC also aligned, and postponed until March 25, 2002, final determinations in the CVD and AD cases. Canadian producers also filed claims against the U.S. government under the investor-state dispute settlement provisions of NAFTA, arguing that the imposition of the AD and CVD duties had caused the United States to breach obligations owed Canadian investors in the United States under NAFTA Chapter 11. As a result, duty deposits on these entries were to be returned. Other U.S. These determinations were later challenged by Canada in WTO compliance proceedings. Export Restraints as Subsidies (DS194)

As noted earlier, the DOC recognized the countervailability of export restrictions in its 1992 determination that Canadian softwood lumber was subsidized. The 2006 U.S.-Canada Softwood Lumber Agreement

On April 26, 2006, the United States and Canada announced a tentative agreement to terminate the AD and CVD duties and related litigation. An early version of the agreement was signed on July 1, 2006, with a finalized version signed September 12, 2006.
U.S. lumber producers have long raised concerns about softwood imports from Canada. They argue that Canada subsidizes its lumber producers with low provincial stumpage fees (for the right to harvest trees). In Canada, the provinces own 90% of the timberlands, which contrasts with the United States, where 42% of timberlands are publicly owned and where government timber is often sold competitively; these differences in land tenure make comparisons difficult. U.S. producers also argue that Canadian log export restrictions subsidize producers by preventing others from getting access to Canadian timber; U.S. log exports from federal and state lands are also restricted, but logs are exported from U.S. private lands. Finally, U.S. producers argue that they have been injured by imports of Canadian lumber. They point to the growth in Canadian exports and market share, from less than 3 billion board feet (BBF) and 7% of the U.S. market in 1952 to more than 18 BBF per year and a market share of more than 33% since the late 1990s. Canadians counter these arguments, asserting that their stumpage fees are based on markets, that the WTO prohibits treating export restrictions as subsidies, and that the U.S. industry has been unable to satisfy the growth in U.S. lumber demand for homebuilding and other uses.
The United States initiated investigations of Canadian subsidies—a prerequisite for establishing countervailing duties (CVDs)—in 1982, 1986, and 1991. Subsidy findings led to a 15% Canadian tax on lumber exports in 1986 and a 6.51% CVD in 1992. Canada challenged the CVD, which was revoked in 1994. A 1996 Softwood Lumber Agreement restricted Canadian exports until March 31, 2001. U.S. producers filed antidumping (AD) and CVD petitions immediately after the 1996 agreement expired. U.S. agencies determined that Canadian lumber was subsidized and was being dumped and that the imports threatened to injure U.S. industry. Final AD and CV duties of 27% were imposed in May 2002, although lumber duties were later lowered as a result of annual Commerce Department reviews. Canada filed NAFTA and WTO cases and, with Canadian producers, suits in U.S. federal court challenging U.S. agency actions in the AD and CVD investigations. Canadian companies also filed claims against the United States under the NAFTA investment chapter.
On July 1, 2006, the United States and Canada signed a Softwood Lumber Agreement (2006 SLA) to end the dispute. A finalized version was signed September 12, 2006, and, with subsequent amendments, entered into force October 12, 2006. Among other things, the seven-year agreement provides for the settlement of pending litigation and establishes Canadian export charges, varying by weighted average lumber prices and lower if the Canadian exporting region also accepts volume restraints. The United States has revoked the AD and CVD orders, with at least 80% of the duty deposits being returned to the importers of record. The remaining 20% is being used to fund lumber-related entities and initiatives provided for in the agreement.