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###### Office of the United States Trade Representative

          - [Docket No. USTR-2009-0011]

# AGENCY:

Office of the United States Trade Representative.

# ACTION:

Notice of initiation of Section 302 investigation and determinations therein; imposition of duties on certain softwood lumber from Canada; and request for public comment.

# SUMMARY:

                        Under the 2006 Softwood Lumber Agreement (SLA), Canada agreed to impose export measures on Canadian exports of softwood lumber products to the United States. At the request of the United States, an arbitral tribunal established under the SLA found that Canada had not complied with certain SLA obligations, and in February 2009 the tribunal issued an award concerning the remedy to be applied. In order to enforce U.S. rights under the SLA, the United States Trade Representative (“Trade Representative”) has initiated an investigation under Section 302 of the Trade Act of 1974, as amended (“Trade Act”). In that investigation, the USTR has (i) Determined that Canada is denying U.S. rights under the SLA; (ii) found that expeditious action is required to enforce U.S. rights under the SLA; and (iii) determined that appropriate action under Section 301 of the Trade Act is to impose 10 percent                        *ad valorem*                         duties on imports of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan, as set out in the annex to this notice. The duties will remain in place until such time as the United States has collected $54.8 million, which is the amount determined by the arbitral tribunal. Interested persons are invited to submit comments on the determinations in this investigation, and to participate in a public hearing in the event a hearing is requested.                    

# DATES:

*Effective Date:*                         The 10 percent                         *ad valorem*                         duties on imports of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan shall be effective with respect to products that are entered for consumption or withdrawn from warehouse for consumption on or after April 15, 2009.                    

# ADDRESSES:

                        Non-confidential comments (as explained below) should be submitted electronically via the Internet at                         *http://www.regulations.gov*, docket number USTR-2009-0011. If you are unable to provide submissions by                         *http://www.regulations.gov*, please contact Sandy McKinzy at (202) 395-9483 to arrange for an alternative method of transmission. If (as explained below), the comment contains confidential information, then persons wishing to submit such comments should contact Sandy McKinzy at (202) 395-9483.                    

# FOR FURTHER INFORMATION CONTACT:

John Melle, Deputy Assistant USTR for the Americas, (202) 395-9448, or Daniel Stirk, Assistant General Counsel, (202) 395-9617, for questions concerning the enforcement of U.S. rights under the SLA; William Busis, Associate General Counsel and Chair of the Section 301 Committee, (202) 395-3150, for questions concerning procedures under Section 301; or Gwendolyn Diggs, Staff Assistant to the Section 301 Committee, (202) 395-5830, for questions concerning procedures for filing submissions in response to this notice.

# SUPPLEMENTARY INFORMATION:

## A. Enforcement of U.S. Rights Under the SLA

                    Under the SLA, Canada agreed to impose export measures on Canadian exports of softwood lumber products to the United States. When the prevailing monthly price of lumber, determined per the Agreement, is above US$355 per thousand board feet (MBF), Canadian lumber exports are unrestricted. When prices are at or below US$355 per MBF, each Canadian exporting region has chosen to be subject to either an export tax with a soft volume cap or a lower export tax with a hard volume cap. The export measures are to be adjusted in accordance with the market price of lumber, and the SLA includes an adjustment mechanism to ensure that the export volume caps are calculated                           ( print page 16437)                        appropriately under rapidly changing market conditions.                

                    The SLA provides that disputes under the agreement may be submitted to an arbitral tribunal operating under the auspices of the LCIA (formerly the London Court of International Arbitration). In order to enforce U.S. rights under the SLA, in August 2007 the United States requested that an arbitral tribunal examine a U.S. claim that Canada was not complying with its SLA obligations to impose export measures. In a March 2008 award on liability, the tribunal agreed with the United States that Canada failed properly to calculate export quotas for the Eastern provinces during the first six months of 2007.[1]                                          In a February 26, 2009 award on remedy, the tribunal found that Canada's failure to make the downward adjustments provided for under the SLA resulted in greater levels of shipments from Canada than were allowed under the SLA, a failure which exacerbated already difficult market conditions.[2] 

In its February 2009 award on remedy, the tribunal (i) rejected Canada's argument that Canada had already cured the breach simply by starting to apply the adjustment and thus that no further remedy was required, and (ii) determined that appropriate adjustments to the export measures in light of Canada's breach would consist of collecting an additional 10 percent export charge until Canada had collected CDN $68.26 million. (Based on the exchange rate at the time of the award, the U.S. dollar equivalent is $54.8 million.) The tribunal ordered Canada to cure its breach within 30 days, the maximum period permitted under the SLA. The tribunal determined that if Canada failed to cure the breach within 30 days, the SLA required Canada to impose the compensatory export measures as determined by the tribunal. The tribunal did not opine upon what an adequate cure would be.

During the 30-day period, the United States and Canada discussed Canada's intended course of action to cure the breach. Canada took no action during the 30-day period, which expired on March 28, 2009. On March 27, 2009, Canada informed the United States that it did not intend to adopt any export measure, and instead its only action would be to make an offer of a monetary payment to the Government of the United States. A monetary payment, however, would do nothing to cure Canada's breach resulting from excess shipments of softwood lumber in 2007.

The SLA provides that in the event the complaining party finds that the defending party has failed to cure the breach or impose the compensatory adjustments determined by the Tribunal within 30 days of an award, the complaining party is entitled to impose the compensatory measures itself. Accordingly, with regard to Canada's 2007 breach of the SLA, the SLA authorizes the United States to impose duties in an amount not to exceed the additional export charges that the tribunal has specified as compensation for the breach. The SLA contemplates the use of Section 301 as a mechanism for imposing such duties.

## B. Initiation of Section 302 Investigation and Determinations Therein

Section 302(b) of the Trade Act authorizes the Trade Representative to initiate an investigation of any matter covered under Section 301, including whether the rights of the United States under a trade agreement are being denied. In accordance with the recommendation of the interagency Section 301 Committee, the Trade Representative has initiated an investigation of whether Canada has denied U.S. rights under the SLA.

Section 303 of the Trade Act requires that the Trade Representative request consultations on the date of initiation of the investigation with the country subject to the investigation. Accordingly, the United States has issued a consultation request to the Government of Canada concerning Canada's compliance with its SLA obligations.

Section 304(b) of the Trade Act requires that the Trade Representative engage in certain consultations before making determinations in a Section 301 investigation. However, if expeditious action is required, the Trade Representative may first make determinations in the investigation, and then engage in Section 304 consultations. In accordance with the recommendation of the Section 301 Committee, the Trade Representative has found that expeditious action is required to secure U.S. rights under the SLA.

Under Section 304(a)(1) of the Trade Act, the Trade Representative shall determine whether the rights of the United States under a trade agreement are being denied. If the determination is affirmative, the Trade Representative shall further determine what action to take under Section 301.

                    On the basis of the awards of the LCIA Tribunal and Canada's failure to impose export charges or any other acceptable measure to cure the breach, and in accordance with the recommendation of the Section 301 Committee, the Trade Representative has determined (1) that Canada is denying U.S. rights under the SLA, and (2) that appropriate action under Section 301(a)(1) of the Trade Act is to impose 10 percent                     *ad valorem*                     duties on imports of softwood lumber products from Canada originating in Ontario, Quebec, Manitoba, and Saskatchewan. The details of the action under Section 301 of the Trade Act are set out in the annex to this notice. The duties will apply to articles entered for consumption or withdrawn from warehouse for consumption on or after April 15, 2009. The procedures set forth in the U.S. Customs and Border Protection (CBP) test program for post entry amendments may not be used by participants in that test to submit amendments regarding entries affected by this action.                

                    The duties will remain in place until such time as the United States has collected $54.8 million in duties. USTR will notify U.S. Customs and Border Protection (CBP) of the date on which to cease collecting the additional duties, and USTR will make a public announcement and publish a notice in the                     **Federal Register**                     terminating the application of the additional duties.                

## C. Opportunity for Public Comments

In accordance with Section 304 of the Trade Act, the Section 301 Committee invites comments from interested persons with respect to the determinations made in this investigation. In particular, the comments invited by the Committee include whether Canada is denying U.S. rights under the SLA, and whether the imposition of the 10 percent duty pursuant to this notice is an appropriate action in response. Any comments should be submitted within 30 days of the publication of this notice (by no later than May 11, 2009).

Section 304 of the Trade Act also provides that any interested person may request a public hearing on these matters. Any request for a public hearing should be made within 10 days of the publication of this notice (by no later than April 20, 2009). In the event a hearing is requested, USTR will issue a notice specifying the date of the hearing and the procedures for submitting written testimony.

                    To submit comments via                     *http://www.regulations.gov,*                     enter docket number USTR-2009-0011 on the home page and click “go”. The site will                           ( print page 16438)                        provide a search-results page listing all documents associated with this docket. Find a reference to this notice by selecting “Notice” under “Document Type” on the left side of the search-results page, and click on the link entitled “Send a Comment or Submission.” (For further information on using the                     *http://www.regulations.gov*                     Web site, please consult the resources provided on the Web site by clicking on “How to Use This Site” on the left side of the home page.)                

                    The                     *http://www.regulations.gov*                     site provides the option of providing comments by filling in a “General Comments” field, or by attaching a document. Given the detailed nature of the comments sought by the Section 301 Committee, all comments should be provided in an attached document. Submissions must state clearly the position taken and describe with specificity the supporting rationale and must be written in English. After attaching the document, it is sufficient to type “See attached” in the “General Comments” field.                

                    Comments will be placed in the docket and open to public inspection pursuant to 15 CFR 2006.13, except confidential business information exempt from public inspection in accordance with 15 CFR 2006.15 or information determined by USTR to be confidential in accordance with 19 U.S.C. 2155(g)(2). Comments may be viewed on the                     *http://www.regulations.gov*                     Web site by entering docket number USTR-2009-0011 in the search field on the home page.                

                    Persons wishing to submit business confidential information must certify in writing that such information is confidential in accordance with 15 CFR 2006.15(b), and such information must be clearly marked “BUSINESS CONFIDENTIAL” at the top and bottom of the cover page and each succeeding page. Any comment containing business confidential information must be accompanied by a non-confidential summary of the confidential information. The non-confidential summary will be placed in the docket and open to public inspection. Comments containing business confidential information should not be submitted via the                     *http://www.regulations.gov*                     Web site. Instead, persons wishing to submit comments containing business confidential information should contact Sandy McKinzy at (202) 395-9483. Information or advice contained in a comment submitted, other than business confidential information, may be determined by USTR to be confidential in accordance with section 135(g)(2) of the Trade Act of 1974 (19 U.S.C. 2155(g)(2)). If the submitter believes that information or advice may qualify as such, the submitter—                

(1) Must clearly so designate the information or advice;

(2) Must clearly mark the material as “SUBMITTED IN CONFIDENCE” at the top and bottom of the cover page and each succeeding page; and

(3) Must provide a non-confidential summary of the information or advice.

                    The non-confidential summary will be placed in the docket and open to public inspection. Comments submitted in confidence should not be submitted via the                     *http://www.regulations.gov*                     Web site. Instead, persons wishing to submit such comments should contact Sandy McKinzy at (202) 395-9483.                

William L. Busis,

Chair, Section 301 Committee.

# Footnotes

1.                             The Award on Liability can be viewed on USTR's Web site:                         *http://www.ustr.gov*.                    
        Back to Citation      

2.                             The Award on Remedy can be viewed on USTR's Web site:                         *http://www.ustr.gov*.                    
        Back to Citation      

[FR Doc. E9-8232 Filed 4-9-09; 8:45 am]

BILLING CODE 3190-W9-P