June 18, 2008 / 8:29 PM / in 9 years

Canada exploring response to new U.S. lumber rules

WASHINGTON (Reuters) - Canada is mulling how it will respond to new rules for lumber exports to the United States, expected to become U.S. law as early as Wednesday, including presenting a new complaint at a dispute court.

Jonathan Sauve, a spokesman for the Canadian embassy in Washington, said the new requirements for Canadian lumber shipments into the United States, part of a giant agriculture bill that President George W. Bush vetoed earlier on Wednesday, could “adversely affect” Canadian producers.

“We continue to press this issue through our diplomatic channels, and will continue to explore any legal alternatives that we may have to address this in a satisfactory manner,” Sauve told Reuters.

The Democratic-led Congress is expected to easily override Bush’s veto of the final version of the 2008 farm bill, which sets subsidies, food stamps and certain trade provisions, as early as this afternoon. The House voted, 317-109, to overturn the veto and senators informally indicated they also would override the veto.

Ottawa has watched carefully as lawmakers added new requirements in the bill for softwood lumber, which is used in housing construction, at the behest of some U.S. lumber producers who have long complained Canada has flooded the U.S. market with cheap exports.

The new lumber rules require lumber importers to verify that export fees had been paid for lumber shipments in accordance with a 2006 bilateral agreement on lumber trade.

They would also force the U.S. government to verify compliance with that agreement, and would authorize the government to charge civil penalties of up to $10,000 for importers who knowingly violate trade rules.

“We are also concerned that this proposal will duplicate processes established by the (2006) softwood lumber agreement and introduce new complexities,” Sauve said.

On Tuesday, the U.S. lumber group that lobbied for the softwood provision said the rules would take effect after at most 60 days of when the bill becomes law.

Yet the 2006 agreement, which was heralded by both sides as an opportunity to put to rest decades of lumber lawsuits, is already under strain.

The United States has presented two separate complaints at a London arbitration court empowered to settle problems under the deal, arguing just months after the deal was struck that Canada was not living up to its end of the bargain.

The court issued a mixed decision in the first case, and a second decision has yet to be issued.

One option now for Canada would be to present a complaint of its own over the new rules.

Whether either country would ultimately choose to withdraw from the agreement, instead preferring to have it out in the courts, remains to be seen.

Reporting by Missy Ryan; Editing by Christian Wiessner

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