Vol. 149, No. 1 — January 14, 2015

Registration

SOR/2014-321 December 23, 2014

EXPORT AND IMPORT PERMITS ACT

Allocation Method Order (2015) — 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), makes the annexed Allocation Method Order (2015) — Softwood Lumber Products.

Ottawa, December 22, 2014

JOHN BAIRD
Minister of Foreign Affairs

ALLOCATION METHOD ORDER (2015) — SOFTWOOD LUMBER PRODUCTS

INTERPRETATION

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 are produced by a primary producer 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, CQLR, c. F-4.1.

“reference period” « période de référence »

“reference period” means a period of 36 consecutive months ending on October 31 of the year before the year in which the export allocation will apply.

“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 are remanufactured by a remanufacturer 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 of 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 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 a given year by so informing the Minister in writing no later than 21 days before the beginning of the year in which the export allocation would have applied.

Transfer of portion 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

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 × [(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 in accordance with section 3.

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 monthly allocation

(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 set out in the PPPV in subsection 10(1) and it applies for an export allocation, the primary producer may only receive the allocation of the Quebec quantity determined by the formula in that subsection (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 either an allocation of the Quebec quantity determined by the formula in section 12 (which is based on its historic export volume) or the formula in subsection 10(1) (which is based on its 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 in accordance with section 3.

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 in accordance with section 3;

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 in accordance with section 3; 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 a period of 36 consecutive months beginning on January 1 of the fourth year before the year in which the export allocation will apply; 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 referred to in subsection (1) must not exceed 40% of the primary producer’s average monthly volume of Quebec softwood lumber products produced during the period of 36 consecutive months beginning on January 1 of the fourth year before the year in which the export allocation will apply.

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 in accordance with section 3;

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 in accordance with section 3;

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 in accordance with section 3;

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 × [(EM/TEM) × 30%]

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 in accordance with section 3.

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 monthly allocation

(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 × [(ES/TES) × 20%]

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 in accordance with section 3.

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 monthly allocation

(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

January 1, 2015 or registration

17. This Order comes into force on January 1, 2015 or, if it is registered after that day, it 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

Issues: The Allocation Method Order (2014) — Softwood Lumber Products (SOR/2013-236, published in the Canada Gazette, Part II, Vol. 148, No. 1 — January 1, 2014) applies to export allocations for 2014. A new order is required for 2015.

Objective: Establish 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 as of January 1, 2015.

Description: As of January 1, 2015, export allocations will be made on a company-specific basis to eligible primary producers and remanufacturers of softwood lumber who apply for allocations. The allocation method for Quebec is based upon a company’s choice between two options, namely either historic export volumes or historic production volumes. The allocation methods for Ontario, Manitoba and Saskatchewan are based on either a company’s historic export volumes or a first-come, first-served basis.

Cost-benefit statement: The costs associated with this Allocation Method Order for the Government of Canada are limited to the administrative costs of making the regulation.

Business and consumer impacts: The allocation of regional quota volumes to individual companies will enable Canadian softwood lumber producers and remanufacturers to apply for permits to export softwood lumber products from Quebec, Ontario, Manitoba and Saskatchewan to the United States.

Domestic and international coordination and cooperation: This regulation complies with domestic legislation, namely the Softwood Lumber Products Export Charge Act, 2006 and the Export and Import Permits Act, and with Canada’s international obligations under the 2006 Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America.

Performance measurement and evaluation plan: This Allocation Method Order includes formulae that will be used on a regular basis. Results are continuously monitored. No other performance measurement or evaluation plans are necessary.

Issues

Following the entry into force on October 12, 2006, of the Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America (the SLA), consequential amendments had to be made 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:

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, by ministerial order, 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 Notice to Exporters No. 147, published on the Web site of the Department of Foreign Affairs, Trade and Development Canada (DFATD) 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 established the following orders annually:

The Minister is now making a new order to establish a method to allocate the quantity of softwood lumber products that may be exported during a month as of January 1, 2015.

Objective

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 as of January 1, 2015.

Description

The Order provides that, as of January 1, 2015, 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 either on a company’s historic export volumes of softwood lumber to the United States or on 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, DFATD 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 Notice to Exporters, serial no. 158, at Section 7.0, “Impact of Transfers on Future Years Export History Calculations.”

For the purpose of determining each Quebec applicant’s historic production volumes, DFATD 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).

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 based on 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.

A “remainder pool” will also be created equal to 3% of Ontario’s monthly RQV. Quota in the remainder pool is distributed based on the order of receipt of export permit applications (i.e. first come, first served). Applicants for a share of the remainder pool that have been allocated a share of Ontario’s historic pool must exhaust this allocation prior to applying for the remainder. Exporters that have not been allocated a share of the Ontario’s monthly RQV may also apply for a share of the remainder.

Quebec

Quebec’s RQV is allocated into three pools. First, no less than 7.5% of Quebec’s RQV constitutes the “remanufacturers’ pool.” Once the remanufacturers are allocated their respective shares, the remaining RQV is divided into a historic pool and a reserve pool. This quota is issued to primary mills based either on their historical exports (historic pool) or historical production (reserve pool) based on a 36-month reference period, depending on the manner in which they elect to participate.

The “reserve pool” is established as 4% of the remaining RQV after allocating to remanufacturers. The “historic pool” represents 96% of the RQV after allocating to remanufacturers

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):

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):

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 reference period. 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 30% of Manitoba’s monthly RQV. Each eligible primary producer or remanufacturer is allocated a share of Manitoba’s monthly RQV equivalent to 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 pool is equal to 70% of Manitoba’s monthly RQV. Quota in the remainder pool is distributed based on the order of receipt of export permit applications (i.e. first come, first served). Applicants for a share of the remainder pool that have been allocated a share of Manitoba’s historic pool must exhaust this allocation prior to applying for the remainder. Exporters that have not been allocated a share of the Manitoba’s monthly RQV may also apply for a share of the remainder.

Saskatchewan

The allocation based on historic exports is equal to 20% of Saskatchewan’s monthly RQV. Each eligible primary producer or remanufacturer is allocated a share of Saskatchewan’s monthly RQV equivalent to 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 pool is equal to 80% of Saskatchewan’s monthly RQV. Quota in the remainder pool is distributed based on the order of receipt of export permit applications (i.e. first come, first served). Applicants for a share of the remainder pool that have been allocated a share of Saskatchewan’s historic pool 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.

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; 8.84 BBF in 2010; 8.73 BBF in 2011; 9.46 BBF in 2012 and 10.9 BBF in 2013). 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 is used in the allocation methodologies for the different Option B regions.

Since the current Allocation Method Order only applies to 2014, this new regulation is needed to ensure a stable and predictable environment that will facilitate operational planning for Canadian softwood lumber exporters.

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 from stakeholders following consultation meetings.

The allocation methods proposed for the distribution of RQVs 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

Written input received from industry stakeholders communicated their satisfaction with the current methodology and advocated for its continuation. Ontario provincial officials also endorsed the continuation of the current methodology.

Quebec

Quebec provincial officials and industry representatives have advocated for the continuation of the current methodology, stating that it has provided the stability and predictability sought by the industry.

Manitoba

The Government of Manitoba recommended that the current methodology be maintained.

Saskatchewan

Stakeholders in Saskatchewan communicated divergent opinions relating to the proportion of the split between the remainder pool and the historic pool. Certain stakeholders stressed the importance of maintaining an emphasis on historic allocation while other stakeholders stressed the importance of an increased remainder pool. The Government of Saskatchewan recommended the continuation of the current methodology.

Implementation, enforcement and service standards

DFATD 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 EIPA. 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. DFATD 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 as of January 1, 2015. A Notice to Exporters communicating the Government’s practices and procedures in this regard will be published on DFATD’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

Aaron Fowler
Director
Softwood Lumber Controls Division
Export and Import Controls Bureau
Department of Foreign Affairs, Trade and Development
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343-203-3718
Fax: 613-944-8950