Vol. 145, No. 25 — December 7, 2011

Registration

SOR/2011-269 November 21, 2011

EXPORT AND IMPORT PERMITS ACT

Allocation Method Order (2012) — Softwood Lumber Products

The Minister of Foreign Affairs, pursuant to paragraph 6.3(3)(a) (see footnote a) of the Export and Import Permits Act (see footnote b), hereby makes the annexed Allocation Method Order (2012) — Softwood Lumber Products.

Ottawa, November 15, 2011

JOHN BAIRD
Minister of Foreign Affairs

ALLOCATION METHOD ORDER (2012) — SOFTWOOD LUMBER PRODUCTS
DEFINITIONS

Definitions

1. The following definitions apply in this Order.

“Act” « Loi »

“Act” means the Export and Import Permits Act.

“exported” « exporté »

“exported” has the meaning assigned by section 6.4 of the Act.

“Manitoba quantity” « quantité pour le Manitoba »

“Manitoba quantity” means the quantity of softwood lumber products that may be exported from Manitoba to the United States during a month under subsection 6.3(2) of the Act.

“Ontario quantity” « quantité pour l’Ontario »

“Ontario quantity” means the quantity of softwood lumber products that may be exported from Ontario to the United States during a month under subsection 6.3(2) of the Act.

“primary producer” « entreprise de première transformation »

“primary producer” means a person who produces softwood lumber products from softwood sawlogs and, in the case of Quebec, includes a person who produces Quebec softwood lumber products from softwood sawlogs.

“primary producer’s products” « produits d’une entreprise de première transformation »

“primary producer’s products” means the softwood lumber products that a primary producer produces and that are not remanufactured in Canada.

“Quebec quantity” « quantité pour le Québec »

“Quebec quantity” means the quantity of softwood lumber products that may be exported from Quebec to the United States during a month under subsection 6.3(2) of the Act.

“Quebec softwood lumber products” « produits de bois d’œuvre du Québec »

“Quebec softwood lumber products” means the softwood lumber products produced in Quebec that were reported to the Minister of Natural Resources and Wildlife under the Forest Act, R.S.Q., c. F-4.1.

“reference period” « période de référence »

“reference period” means the period beginning on November 1, 2008 and ending on October 31, 2011.

“remanufacturer” « entreprise de seconde transformation »

“remanufacturer” means a person who remanufactures — within the meaning of subsection 13(1) of the Softwood Lumber Products Export Charge Act, 2006 — softwood lumber products.

“remanufacturer’s products” « produits d’une entreprise de seconde transformation »

“remanufacturer’s products” means the softwood lumber products that a remanufacturer remanufactures and that are not further remanufactured in Canada.

“Saskatchewan quantity” « quantité pour la Saskatchewan »

“Saskatchewan quantity” means the quantity of softwood lumber products that may be exported from Saskatchewan to the United States during a month under subsection 6.3(2) of the Act.

“softwood lumber products” « produits de bois d’œuvre »

“softwood lumber products” means the products referred to in item 5104, Group 5 of the schedule to the Export Control List.

GENERAL

Application

2. This Order establishes the method for allocating the quantity of softwood lumber products that may be exported during a month from each of Ontario, Quebec, Manitoba and Saskatchewan in 2012 for the purpose of paragraph 6.3(3)(a) of the Act.

Relinquishing export allocation

3. For the purposes of this Order, a primary producer or remanufacturer relinquishes its export allocation for 2012 by so informing the Minister in writing by December 10, 2011.

Transfer of export allocation

4. When a primary producer or remanufacturer transfers, with the consent of the Minister under subsection 6.3(4) of the Act, a portion of the export allocation issued to it by the Minister for a month, that portion is deemed to be included in the volume of the primary producer’s or remanufacturer’s products that were exported in that month to the United States under export permits, and not in the volume of the transferee, if

• (a) the portion transferred includes a corresponding volume of products; or
  
• (b) the total of the portion that is transferred during the month and that does not include products does not exceed 15% of the volume of the primary producer’s or remanufacturer’s export allocation for the month.
  

ONTARIO

Determination of allocation

5. The allocation of the Ontario quantity to a primary producer or remanufacturer who applies for an export allocation is determined by the formula

OQ x [(EO/TEO) × 97%]

where

OQ  is the Ontario quantity;

EO is the volume of the primary producer’s or remanufacturer’s products that were exported from Ontario to the United States under export permits during the reference period; and

TEO is the total volume of primary producers’ and remanufacturers’ products that were exported from Ontario to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012.

Allocation of remainder

6. (1) Subject to subsection (2), the allocation of the remainder of the Ontario quantity is based on the order of receipt of applications for an export permit for a share of the remainder, with each applicant receiving the volume applied for until the remainder of the Ontario quantity is fully allocated.

Exhaustion of an allocation for a month

(2) An applicant who has received an allocation of the Ontario quantity for a month must exhaust that allocation before applying for an export permit for a share of the remainder, which is to be dealt with in accordance with subsection (1).

QUEBEC

Remanufacturers

7. (1) If some or all of a remanufacturer’s products were exported from Quebec to the United States under export permits during the reference period and the remanufacturer applies for an export allocation, the remanufacturer may only receive the allocation of the Quebec quantity determined by the formula in section 8 (which is based on its historic export volume).

Primary producers without export history

(2) If none of a primary producer’s products were exported from Quebec to the United States under export permits during the reference period and if the primary producer produced Quebec softwood lumber products during the period beginning on January 1, 2008 and ending on December 31, 2010 and it applies for an export allocation, the primary producer may only receive the allocation of the Quebec quantity determined by the formula in subsection 10(1) (which is based on its historic production volume).

Primary producers with export history

(3) If some or all of a primary producer’s products were exported from Quebec to the United States under export permits during the reference period and the primary producer applies for an export allocation, the primary producer must choose to receive an allocation of the Quebec quantity determined by the formula in section 12 (which is based on their historic export volume) or the formula in subsection 10(1) (which is based on their historic production volume).

Allocation to remanufacturers

8. (1) Subject to subsection (2), the allocation of the Quebec quantity to a remanufacturer that is based on its historic export volume is determined by the formula

QQ × (RE/TEQ)

where

QQ is the Quebec quantity;

RE is the volume of the remanufacturer’s products that were exported from Quebec to the United States under export permits during the reference period; and

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012.

Minimum of total allocations

(2) The sum of the allocations of the Quebec quantity to remanufacturers must be equal to or greater than 7.5% of the Quebec quantity.

Reserve pool

9. The reserve pool is determined by the formula

(QQ × TTPE/TEQ – RMQ) × 4%

where

QQ is the Quebec quantity;

TTPE is the total volume of primary producers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers who relinquish their export allocations for 2012;

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012; and

RMQ is the amount of additional allocations required to meet the minimum 7.5% threshold referred to in subsection 8(2) if the sum of the allocations to all remanufacturers is less than 7.5% of the Quebec quantity.

Allocation to primary producers — historic production volume

10. (1) The allocation of the Quebec quantity to a primary producer that is based on its historic production volume is determined by the formula

RP × (PPPV/TPV)

where

RP is the reserve pool determined under section 9;

PPPV is the volume of Quebec softwood lumber products that the primary producer produced during the period beginning on January 1, 2008 and ending on December 31, 2010; and

TPV is the total volume of Quebec softwood lumber products produced during that period by primary producers whose allocations are based on their historic production volume.

Maximum allocation

(2) The allocation referenced in subsection (1) is not to exceed 40% of the primary producer’s average monthly volume of Quebec softwood lumber products produced during the period beginning on January 1, 2008 and ending on December 31, 2010.

Records of production volume

(3) The volume of Quebec softwood lumber products produced by a primary producer is based on records provided, with the consent of the primary producer, by the Government of Quebec to the Government of Canada.

Residual non-allocated quantity

11. The residual non-allocated quantity of the reserve pool is determined by the formula

RP – AP

where

RP is the reserve pool determined under section 9; and

AP is the total volume of softwood lumber products allocated to primary producers determined under section 10.

Allocation to primary producers — historic export volume

12. The allocation of the Quebec quantity to a primary producer that is based on its historic export volume is determined by the formula

(PPE/TPPEH) × {[(QQ × TPPE/TEQ – RMQ) × 96%] + RNA}

where

PPE is the volume of the primary producer’s products that were exported from Quebec to the United States under export permits during the reference period;

TPPEH is the total volume of primary producers’ products that were exported from Quebec to the United States under export permits during the reference period in respect of export allocations based on historic export volume, excluding the volume of products of primary producers who relinquish their export allocations for 2012;

QQ is the Quebec quantity;

TPPE is the total volume of primary producers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers who relinquish their export allocations for 2012;

TEQ is the total volume of primary producers’ and remanufacturers’ products that were exported from Quebec to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012;

RMQ is the amount of additional allocations required to meet the minimum 7.5% threshold referred to in subsection 8(2) if the sum of the allocations to all remanufacturers is less than 7.5% of the Quebec quantity; and

RNA is the residual non-allocated quantity of the reserve pool determined under section 11.

MANITOBA

Determination of allocation

13. The allocation of the Manitoba quantity to a primary producer or remanufacturer who applies for an export allocation is determined by the formula

MQ x [(EM/TEM) × 40%]

where

MQ is the Manitoba quantity;

EM is the volume of the primary producer’s or remanufacturer’s products that were exported from Manitoba to the United States under export permits during the reference period; and

TEM is the total volume of primary producers’ and remanufacturers’ products that were exported from Manitoba to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012.

Allocation of remainder

14. (1) Subject to subsection (2), the allocation of the remainder of the Manitoba quantity is based on the order of receipt of applications for an export permit for a share of the remainder, with each applicant receiving the volume applied for until the remainder of the Manitoba quantity is fully allocated.

Exhaustion of an allocation for a month

(2) An applicant who has received an allocation of the Manitoba quantity for a month must exhaust that allocation before applying for an export permit for a share of the remainder, which is to be dealt with in accordance with subsection (1).

SASKATCHEWAN

Determination of allocation

15. The allocation of the Saskatchewan quantity to a primary producer or remanufacturer who applies for an export allocation is determined by the formula

SQ x [(ES/TES) × 40%]

where

SQ is the Saskatchewan quantity;

ES is the volume of the primary producer’s or remanufacturer’s products that were exported from Saskatchewan to the United States under export permits during the reference period; and

TES is the total volume of primary producers’ and remanufacturers’ products that were exported from Saskatchewan to the United States under export permits during the reference period, excluding the volume of products of primary producers and remanufacturers who relinquish their export allocations for 2012.

Allocation of remainder

16. (1) Subject to subsection (2), the allocation of the remainder of the Saskatchewan quantity is based on the order of receipt of applications for an export permit for a share of the remainder, with each applicant receiving the volume applied for until the remainder of the Saskatchewan quantity is fully allocated.

Exhaustion of an allocation for a month

(2) An applicant who has received an allocation of the Saskatchewan quantity for a month must exhaust that allocation before applying for an export permit for a share of the remainder, which is to be dealt with in accordance with subsection (1).

COMING INTO FORCE

Coming into Force

17. This Order comes into force on the day on which it is registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Order.)

Executive summary

Issue

On October 12, 2006, the Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (the “SLA”) entered into force, which entailed consequential amendments to the Export and Import Permits Act (EIPA) and its related regulations to enable Canada to comply with many of its obligations under the SLA. The SLA requires Canada to implement an “export measure” respecting exports of softwood lumber products to the United States. The export measure may take one of two forms:

• Option A — an export charge; or
• Option B — an export charge at a lower rate, along with a restraint on the volume of exports.

The provinces of Manitoba, Ontario, Quebec and Saskatchewan elected to be subject to the Option B export measure. Pursuant to the SLA, the Government of Canada was required to implement the Option B export measure effective January 1, 2007.

Pursuant to subsection 6.3(2) of the EIPA, the Minister of Foreign Affairs (the “Minister”) has the authority to determine the quantity of softwood lumber products that are exported from a region during a month, otherwise known as the monthly Regional Quota Volume (the “RQV”). Furthermore, pursuant to subsection 6.3(3) of the EIPA, the Minister has the authority to establish a method for allocating the RQV among companies that have registered in accordance with section 23 of the Softwood Lumber Products Export Charge Act, 2006 and to issue export allocations to these companies on a monthly basis. An export allocation may be used only for the purpose of obtaining a permit to export to the United States certain softwood lumber products first manufactured in Quebec, Ontario, Manitoba or Saskatchewan.

The Government’s initial policy that established eligibility criteria for export allocations respecting softwood lumber products first processed in Option B regions for 2007 was communicated to exporters in letters dated December 14, 2006, and in a Notice to Exporters No. 147, published on the Web site of the Department of Foreign Affairs and International Trade on January 31, 2007. The Minister made the Allocation Method Order — Softwood Lumber Products, SOR/2007-166 (published in the Canada Gazette, Part Ⅱ, Volume 141, No. 15, on July 25, 2007), which implemented the Government of Canada’s policy with respect to allocations for 2007. Subsequently, the Minister has made

• Allocation Method Order (2008) — Softwood Lumber Products, SOR/2007-305 (published in the Canada Gazette, Part Ⅱ, Volume 141, No. 26, on December 26, 2007), with respect to allocations for 2008;
• Allocation Method Order (2009) — Softwood Lumber Products, SOR/2009-10 (published in the Canada Gazette, Part Ⅱ, Volume 143, No. 1, on January 7, 2009), with respect to allocations for 2009;
• Allocation Method Order (2010) — Softwood Lumber Products, SOR/2009-320 (published in the Canada Gazette, Part Ⅱ, Volume 143, No. 25, on December 9, 2009), with respect to allocations for 2010; and
• Allocation Method Order (2011) — Softwood Lumber Products, SOR/2010-278 (published in the Canada Gazette, Part Ⅱ, Volume 144, No. 25, on December 8, 2010), with respect to allocations for 2011.

The Minister may make an order to establish a method to allocate the quantity of softwood lumber products that may be exported during a month, for the period of January 1, 2012, to December 31, 2012.

Objectives

This regulation establishes the method for allocating, to individual companies, the quantity of softwood lumber products that may be exported to the United States during a month from Quebec, Ontario, Manitoba and Saskatchewan for the period of January 1, 2012, to December 31, 2012.

Description

The regulation provides that for the period of January 1, 2012, to December 31, 2012, export allocations will be made on a company-specific basis to eligible primary producers and remanufacturers of softwood lumber who applied for allocations. The allocation methods for Ontario, Manitoba and Saskatchewan are based on either a company’s historic export volumes of softwood lumber to the United States or a first-come, first-served basis. The allocation method for Quebec is based upon a company’s choice between two options, namely either historic export volumes or historic production volumes.

For the purpose of determining each applicant’s historic export volumes to the United States, the Department of Foreign Affairs and International Trade (DFAIT) will use data collected from permits issued for softwood lumber exports pursuant to the EIPA, subject to any necessary adjustments to account for transfers as set out in section 4 of the Order. For details see section 7.0, “Impact of Transfers on Future Years Export History Calculations” in the Notice to Exporters, serial no. 158, covering the reference period of November 1, 2008, to October 31, 2011 (the “Reference Period”).

For the purpose of determining each Quebec applicant’s historic production volumes, DFAIT will use data collected by the Government of Quebec pursuant to its authority under Quebec’s Forest Act (R.S.Q., c. F-4.1), during the period beginning on January 1, 2008, and ending on December 31, 2010.

Applicants are given credit for all exports to the United States for which they were reported to be the primary producer or remanufacturer who processed that lumber. Further details on each allocation method are provided below.

Ontario

The allocation based on historic exports is equal to 97% of Ontario’s monthly RQV. Each eligible primary producer or remanufacturer is allocated a share of Ontario’s monthly RQV equivalent to 97% of its share of Ontario’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

The remainder is equal to 3% of Ontario’s monthly RQV. The remainder is allocated based on the order of receipt of export permit applications. Applicants for a share of the remainder that have been allocated a share of Ontario’s monthly RQV must exhaust this allocation prior to applying for the remainder. Exporters that have not been allocated a share of Ontario’s monthly RQV may also apply for a share of the remainder.

Quebec

Each eligible remanufacturer is allocated a share of Quebec’s monthly RQV equivalent to its share of Quebec’s historic export volumes to the United States during the Reference Period, subject to any necessary adjustments to account for transfers with a minimum of 7.5% of the Quebec monthly RQV being allocated to all remanufacturers.

Primary producers whose softwood lumber products were exported from Quebec are given the option to receive an allocation based on either their historic export volumes to the United States, subject to any necessary adjustments to account for transfers, or their historic production volumes of softwood lumber products.

In general terms, each primary producer that chooses to receive an allocation that is based on their historic export volumes to the United States will receive an allocation that is the product of the share set out in (a) times the “amount” set out in (b):

• (a) the primary producer’s share of all primary producers’ historic export volumes from Quebec to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period;
  
• (b) the “amount” is the RQV times all primary producers’ share of Quebec’s total historic exports to the United States during the Reference Period, minus the required quantity to satisfy the minimum 7.5% of the Quebec monthly RQV to be allocated to remanufacturers (described in the first paragraph); that result is then multiplied by 96%, plus the “residual non-allocated quantity” of the “reserve pool” (described below).

In general terms, each primary producer that chooses to receive an allocation based on their historic production volumes of softwood lumber products will receive an allocation that is the product of the share set out in (c) times the “amount” set out in (d):

• (c) the primary producer’s share of all of Quebec’s primary producers’ historic production volumes during the period of January 1, 2008, to December 31, 2010;
• 
  (d) the “amount” is the RQV times all primary producers’ share of Quebec’s total historic exports to the United States during the Reference Period, minus the required quantity to satisfy the minimum 7.5% of the Quebec monthly RQV to be allocated to remanufacturers (described in the first paragraph); that result is then multiplied by 4%.
  

The allocation based on historic production volumes may not exceed 40% of the primary producer’s average monthly volume of Quebec’s softwood lumber products produced during the period of January 1, 2008, to December 31, 2010. If the 40% threshold is exceeded, the surplus amount is determined to be the “residual non-allocated quantity” of the “reserve pool.”

Manitoba

The allocation based on historic exports is equal to 40% of Manitoba’s monthly RQV. Each eligible primary producer or remanufacturer is allocated a share of Manitoba’s monthly RQV equivalent to 40% of its share of Manitoba’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

The remainder is equal to 60% of Manitoba’s monthly RQV. The remainder is allocated based on the order of receipt of export permit applications. Applicants for a share of the remainder that have been allocated a share of Manitoba’s monthly RQV must exhaust this allocation prior to applying for the remainder. Exporters that have not been allocated a share of Manitoba’s monthly RQV may also apply for a share of the remainder.

Saskatchewan

The allocation based on historic exports is equal to 40% of Saskatchewan’s monthly RQV. Each eligible primary producer or remanufacturer is allocated a share of Saskatchewan’s monthly RQV equivalent to 40% of its share of Saskatchewan’s historic export volumes to the United States, subject to any necessary adjustments to account for transfers, during the Reference Period.

The remainder is equal to 60% of Saskatchewan’s monthly RQV. The remainder is allocated based on the order of receipt of export permit applications. Applicants for a share of the remainder that have been allocated a share of Saskatchewan’s monthly RQV must exhaust this allocation prior to applying for the remainder. Exporters that have not been allocated a share of Saskatchewan’s monthly RQV may also apply for a share of the remainder.

Regulatory and non-regulatory options considered

The Softwood Lumber Agreement requires Canada to impose volume restraints on softwood lumber product exports from Option B regions (i.e. Quebec, Ontario, Manitoba and Saskatchewan). The certainty and transparency of a regulation provides the optimal environment for the industry to be able to develop their business plans for 2012.

Benefits and costs

Softwood lumber is one of Canada’s largest exports to the United States, with 21.5 billion board feet (BBF) of lumber shipped in 2005 alone (20.2 BBF in 2006; 16.7 BBF in 2007; 11.72 BBF in 2008; 8.37 BBF in 2009 and 8.84 BBF in 2010). It constitutes an important element of the largest trading relationship in the world.

The costs associated with this allocation method order for the government are limited to the administrative costs of making the regulation.

Rationale

These allocation methodologies were developed following extensive consultations with provincial governments and industry stakeholders, and reflect the differing circumstances of the softwood lumber industry from region to region. In order to take into account the current state of the softwood lumber industry, and the views of various stakeholders, a 36-month reference period of November 1, 2008, to October 31, 2011, is used in the allocation methodologies for the different Option B regions.

Since the current allocation method order only applies to 2011, this regulation is needed to ensure that companies are able to develop their business plans for 2012.

Consultation

The Government of Canada held consultation meetings with industry representatives and governments of the provinces that elected the Option B export measure, regarding specific allocation methodologies for their particular provinces. In addition, further input was received, in this regard, from stakeholders following consultation meetings.

The allocation methods proposed for quotas respecting softwood lumber exports from Quebec, Ontario, Manitoba and Saskatchewan reflect the advice provided by those provinces following exchanges between federal and provincial officials.

Ontario

Stakeholders voiced their views with respect to the allocation methodology; for example, a company suggested that the size of the remainder pool for Ontario be reduced. Overall, Ontario provincial officials and industry representatives have expressed their preference for the current methodology to be maintained.

Quebec

While some divergent views with regard to the reserve pool were voiced by some stakeholders, Quebec provincial officials and industry representatives have indicated their support in general for the current methodology, including the 36-month reference period.

Manitoba

Industry representatives have indicated their preference for a methodology that allows for some quota to be allocated based on historical exports and some on a first-come, first-served basis.

Saskatchewan

The Government of Saskatchewan supports an allocation methodology that employs a split between the historic and remainder pools.

Although proposals for changes to the reference period and the proportion of the split between the historic allocation and the remainder pools were voiced throughout consultations, overall, industry representatives have expressed their preference to maintain the allocation methodology currently in place.

Implementation, enforcement and service standards

The Department of Foreign Affairs and International Trade (DFAIT) is responsible for administering and enforcing the allocation method orders with respect to softwood lumber products. Providing false or misleading information in an application to obtain an export allocation is an offence and may lead to prosecution under the Export and Import Permits Act. The Act requires that records be kept and retained until the expiry of six years after the end of the year to which they relate, or for any other period that may otherwise be prescribed by regulation. DFAIT conducts periodic audits to ensure that the conditions and requirements for receiving export allocations are respected.

This regulation will be binding with respect to export allocations issued by the Minister of Foreign Affairs from January 1, 2012, to December 31, 2012. A Notice to Exporters communicating the government’s practices and procedures in this regard will be published on DFAIT’s Web site.

Performance measurement and evaluation

This regulation includes formulae that are used on a regular basis. Results are continuously monitored. No other performance measurement or evaluation plans are necessary.

Contact

François Rivest
Director
Softwood Lumber Controls Division
Export and Import Controls Bureau
Department of Foreign Affairs and International Trade
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 613-996-0934
Fax: 613-944-8950

Footnote a
S.C. 2006, c. 13, s. 111

Footnote b
R.S., c. E-19