Since the 1980s, the United States and Canada have been engaged in a trade dispute regarding softwood lumber. One of the main causes of the dispute is differences in costs for timber harvested on public land in Canada as compared with timber from private land in the United States. In Canada, federal and provincial governments own approximately 90 percent of the timberlands and set harvest fees and allocations. In contrast, in the United States, only about 40 percent of the timberland is publicly owned, and the timber from that land is sold through competitive auctions. The U.S. lumber industry is concerned that the use of government-set fees in Canada raises the possibility that private industry in Canada has access to timber at less than market prices. The decades-long softwood lumber dispute has alternated between periods with a softwood lumber trade agreement and periods of litigation without an agreement. In 2006, the United States and Canada ended a period of antidumping and countervailing duty proceedings by signing the Softwood Lumber Agreement, a 7-year agreement with an option for a 2-year renewal. The agreement established a framework for managing Canadian exports of softwood lumber to the United States. Key provisions of the agreement include variable export measures, information exchange requirements, anticircumvention measures, dispute settlement mechanisms, and a settlement agreement to end numerous claims that were pending when the agreement was signed. (App. II contains more information on the provisions of the 2006 Softwood Lumber Agreement.) In 2008, Congress passed the Softwood Lumber Act imposing additional requirements on CBP for monitoring the softwood lumber trade. According to the legislation, the required reconciliations are to ensure the proper operation and implementation of international agreements related to softwood lumber. Furthermore, the importer declaration program established by the act is intended to assist in the enforcement of any international obligations arising from international agreements related to softwood lumber. The act does not contain language specifying an end date for these efforts. Under the act, CBP is to implement the following requirements related to softwood lumber imports from all countries: Importer declaration program: CBP is to establish an importer declaration program requiring that importers from any country declare, among other things, that they have made an appropriate inquiry and that to the best of the person’s knowledge and belief the export price is determined as defined in accordance with the act; the export price is consistent with the export price on the export permit, if any, granted by the country of export; and the exporter has paid, or committed to pay, all export charges. Reconciliation: To ensure the proper implementation and operation of international agreements related to softwood lumber, CBP is to reconcile the export price (or revised export price) declared by the importer with the export price (or revised export price) on the export permit, if any. Verification: To verify the importer declaration, the act requires CBP to periodically verify that (1) the export price declared by the importer is the same as the export price provided on the export permit, if any, issued by the country of export and (2) the estimated export charge is consistent with the applicable export charge rate as provided by Commerce. Semiannual reports: CBP is to report to Congress every 6 months describing the reconciliations and verifications programs and identifying the manner in which the U.S. importers subject to reconciliations and verifications were chosen; identifying any penalties imposed under the act and any patterns of noncompliance with the act; and identifying any problems or obstacles encountered in the implementation and enforcement of the act. As shown in table 1, CBP has taken a variety of steps to implement key provisions of the Softwood Lumber Act of 2008. CBP added three new fields to the U.S. entry form to collect data on the export price, estimated export charge, and importer declaration needed for the reconciliation and verification processes. CBP started enforcing the new requirements imposed by the act in September 2008. The act and CBP require these three data elements for softwood lumber imports from all countries. However, according to CBP officials, only imports from Canada include export charge information because of the 2006 Softwood Lumber Agreement. Furthermore, CBP reported in October 2009 that importers of softwood lumber products from non-Canadian countries have a difficult time in determining the correct amount to list as the export price because the export price definition in the act contains references specific to Canadian softwood lumber, such as “remanufacturer.” To implement the act’s reconciliation requirement, CBP compares publicly available aggregate regional export price data from Canada with aggregate export price data from the U.S. entry form. (Under the act, CBP is reconciling this information only for Canadian exports because Canada is the only country with which the United States has an international agreement specifically on softwood lumber.) As shown in figure 1, CBP obtains the export price from the U.S. entry form, which the U.S. importer should copy from the Canadian export permit. CBP then compares aggregate monthly data from the U.S. entry forms with the publicly available export price data that are posted on the Web site of Canada’s DFAIT. Cdin exporter end Cdin export permit to Deprtment of Foreign Affir nd Interntionl Trde (DFAIT) U.S. CBP compares aggregate information. U.S. importer end U.S. entry form to U.S. Custom nd Border Protection (CBP) Are the total export prices the same? According to CBP officials, on a monthly basis, they reconcile aggregate export price data based on the Canadian region of export. CBP first combines the individual-level export price data from each U.S. entry form for all shipments during a 1-month period and reconciles these values with the aggregate Canadian export data. According to CBP, each month, analysts run a computer program to compare the U.S. and Canadian data and to identify discrepancies. In its October 2009 semiannual report to Congress, CBP reported that the overall variance between the export price on the entry summary form and the export price received from the “country of export” for the 6-month period between October 2008 and March 2009 was 1 percent. As required by the act, CBP has developed processes to verify the importer declaration, which includes verifying that the export price declared by the importer is the same as the export price provided on the export permit, if any, issued by the country of export; the estimated export charge is consistent with the applicable export charge rate as provided by Commerce; and importers have “made appropriate inquiry, including seeking appropriate documentation from the exporter,” and to the best of the importer’s knowledge and belief that the exporter has paid or committed to pay all applicable export charges. To meet these legislative requirements, CBP adapted its existing Entry Summary Compliance Measurement program to include softwood lumber as a subcomponent. The program selects softwood lumber entries for verification via random statistical sampling. When an entry is selected for verification, import specialists at the ports review the entry form to ensure that all of the required information is included and request supporting documentation from the importers to verify that the information on the entry document has been recorded correctly. The import specialists then enter the results into an electronic database system that CBP headquarters accesses and analyzes. In its October 2009 semiannual report to Congress, CBP reported that approximately 82 percent of the samples its officials verified during the first 6 months of the process, from October 2008 to March 2009, correctly reported the export price—with a higher rate, almost 85 percent, for imports from Canada. Regarding the export charge, about 77 percent of the entries CBP sampled from Canada had that value reported correctly. In addition, CBP reported that about 90 percent of the importer declarations were reported properly. According to CBP, the requirements did not apply to an additional 5 to 10 percent of the selected Canadian samples because they were exempt from the provisions of the bilateral trade agreement. Officials stated that the combination of samples that were reported correctly and those for which the requirements were not applicable brought the overall results for the softwood lumber samples for Canada close to what they see for other commodities. Because the importer or customs broker should copy the export price from the Canadian export permit onto the U.S. entry form, CBP officials said they expect discrepancies in the data to result mainly from the following: (1) human errors in copying the export price from one form to another and (2) differences caused by converting from Canadian to U.S. dollars. In addition, CBP officials explained that the export price for a shipment could be listed as one line on the Canadian export permit, but broken into multiple lines on the U.S. entry form. CBP has instructed importers in how to resolve this issue, but officials said that importers sometimes do not perform this calculation correctly. In its October 2009 report to Congress, CBP reported that discrepancies between the export price reported on the Canadian export permit and the export price reported on the U.S. entry form have decreased over time. CBP reported a variance of almost 16 percent between the U.S. and Canadian data in October 2008, the first month of reconciliations under the act. By March 2009, the variance between the U.S. and Canadian export prices had decreased to approximately 2 percent. CBP officials told us that 5 to 10 percent of the entries randomly selected for review as part of the verification process were not recorded correctly due to data entry errors by either the importer or CBP’s import specialists. These errors may have been caused by an import specialist incorrectly recording the verification data in CBP’s database or not following the instructions consistently.