International Trade Committee on Oct. 24th, 2006

[Paul Robertson]

If I may--and I'll ask the legislative drafters to look--it's also provided for that, for those who participate in the EDC mechanism, the 18% that they authorize the EDC to pay to U.S. interests is the remit for the special charge that is being imposed on the importers of record. Therefore, the participation in the program and the portion that's taken from the refunds to pay the U.S. side is deemed to have met the conditions of the special charge.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Could you reference which clause in the legislation refers to that, please?

[John Clifford]

The remissions in particular, or...?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

No, what Mr. Robertson has just described.

Okay, so in the legislation right now, the situation I've just spoken about is a potential reality. Thank you.

[Paul Robertson]

Well, if I can just finish--

[The Chair, Conservative, Leon Benoit]

Mr. Julian, Mr. Robertson wants to respond to that.

[Paul Robertson]

I'll just flag to the committee that a remission order will be issued to those companies that participate in the EDC program, concerning the special charge obligation.

John.

[John Clifford]

There's authority under the Financial Administration Act to make a remission order of that kind, and it was not necessary to repeat that authority here. So there's no intention to double the burden on the payer.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'm talking about what's here, and you confirmed what I asked, so thank you for that.

[Paul Robertson]

The last point on that is this. For the importers of record, when making that decision whether to participate in the EDC program or to wait for Customs to refund their money directly, the special charge is identified, as was the remittance of the 18% under the special charge, if they participated in the EDC program. That was made clear to importers of record up front, so as to allow them to make their decisions.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Julian.

Mr. Bagnell, for five minutes.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you very much.

This isn't really a question, it's more a request for a simple briefing. Part of it's a little off topic.

When this whole issue started years ago, when the Americans put the tax on...and my question is related to the territory. I wonder if you could give me a bit a briefing of the history. The first time round, the territories were exempt, as you have in this act, and then on the second round of tariffs and everything, the territories were included for some reason. Now they're exempt again. I wonder if you can give me a history as to why the Americans included the territories on one particular occasion and now they're exempt again.

[Paul Robertson]

Unless my colleagues have the whole history, I think we'll have to confine ourselves to why they were exempted under this agreement, though we can certainly undertake to look at past negotiation.

Brice, would you like to talk a little bit about the exemption of the territory?

[Brice MacGregor, Senior Trade Policy Analyst, Sofwood Lumber, Department of Foreign Affairs and International Trade]

I can't really speak for the motivations of the United States, but I'll simply note that the amount of lumber that is traded between the territories and the United States is not large, so I could only speculate as to what sort of motivation the United States would have had for either wanting them in or wanting them out. I can't really go any further than that.

I hope that addresses your question.

[Larry Bagnell, Liberal, Yukon, YT]

But I guess the important point...oh, I'm sorry, Chair.

[The Chair, Conservative, Leon Benoit]

You can have one more question, if you'd like. But I'd remind Mr. Bagnell that we're not here to discuss the softwood lumber deal and what—

[Larry Bagnell, Liberal, Yukon, YT]

Yes, but I only wanted some background.

[The Chair, Conservative, Leon Benoit]

Well, I'll allow Mr. Robertson to answer. But then perhaps you'd get on to questions about this bill.

Go ahead.

[Paul Robertson]

Only to reinforce that the amounts of exports are minimal. The territories requested a specific exclusion--even though a charge would not really affect them, given the small amounts--and the negotiators were able to secure that exclusion for the territories.

[Larry Bagnell, Liberal, Yukon, YT]

Maybe later, if there's any other background, you would get back to me.

My next question is related to page 8 of the deck, in the first bullet, where you're talking about “...less the costs incurred by government for administration in legal matters related to the Act and the Agreement”. Could you give some more details on how much that might be, how it would be calculated and what would be taken away from the refund for those purposes?

[Paul Robertson]

We don't have a formula yet. There's to be consultation with the provinces on that. But as you are aware, the softwood lumber agreement envisages a lot of work, in terms of other exit developments out of the agreement, work on administrative and customs elements, so there's a lot of ongoing work that will require administrative costs to conduct. So what you're basically speaking about in administrative costs are those costs incurred by the federal government in the administration and negotiations within the softwood lumber agreement, i.e., the costs that are imposed on the federal government because of the presence of the agreement. I don't have a figure for you. However, when there is agreement with the provinces, that will be all set out.

With respect to the legal matters, there are both legal opinions, and given that the agreement also has within it the dispute settlement mechanism, if that mechanism is used we have to provide for the costs to the federal government in representing Canadian interests in those proceedings. Those are the types of cost. We haven't quantified them, and clearly, that is a subject of federal-provincial negotiation in terms of agreement on those costs. As you know, the rest will be given to the provinces in proportion to their companies paying the charges in the first place.

[Larry Bagnell, Liberal, Yukon, YT]

I assume the most recent court cases Canada won in the States came after these agreements, have no effect, and were expected.

[Paul Robertson]

A range of legal proceedings followed the bringing into force of the agreement. A precondition for bringing the agreement into force was the liquidation of duties and the return of the $4.5 billion to Canada. This was accomplished. However, the authority of the softwood lumber agreement is not the determining factor for the courts. It was done through a mooting process, and a lot of the legal proceedings we're seeing now are following up on the mooting. A lot of housecleaning or procedural elements will require work in the coming months. You'll see a lot of this unfolding. You cannot cite the authority of the agreement to the various legal proceedings as the rationale. You have to cite that the United States has issued the revocation order and liquidated the duties, so that the issues that gave rise to those cases are no longer in play and are therefore mooted.

You're talking about the subsequent residual legal proceedings. That's the bulk of them and the reasons for their existence.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Bagnell.

Mr. André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Good day, Messrs Robertson, MacGregor, Seebach, Hagmann and Clifford.

As you know, the Bloc Québécois supported this agreement, albeit unenthusiastically. You're somewhat familiar with the crisis in Quebec in the softwood lumber sector since the signing of this agreement.

I have some questions concerning one article in the agreement. Export charges collected are, I believe, remitted to the provinces. I read that pursuant to one provision, the federal government will distribute among the provinces the export charges collected, minus the implementation costs paid out of the Consolidated Revenue Fund and other costs incurred to defend Canada's interests in any legal challenges arising from the agreement.

The article in question stipulates that operating requirements associated with the sound administration of the agreement, including the collection, ongoing administration of export charges, the issuing of export permits, the assignment and management of volumes and quotas...

On reading through the provision, I realize -- and you can correct me if I'm wrong -- that the export tax refund paid to the provinces will not correspond to the costs incurred, as there are many expenses associated with administering the agreement. If I understand correctly, if a portion of the export taxes is refunded to Quebec companies, it's not clear that they will get back the full amount charged, because of administration costs.

What percentage of the refund covers administration costs? Will the situation be such that the provinces and Quebec pay from 50% to 60% of the export taxes? How much will be left after the export taxes have been paid, along with all of the costs associated with the bureaucracy overseeing the agreement?

Secondly, pursuant to the SLA, a portion of the money goes to the US lumber associations. Quebec is currently in the throes of a crisis. The Quebec government has set up a program to support the softwood lumber industry because a number of major companies are in crisis at this time. Will there be any export revenues remaining, I ask you? If so, we know very well that they will go the Quebec government. The money will not go to support the industry, because that would be a form of subsidy.

Does the bill make provision in some way for this money to go to the provinces? And how will they use this money? What directives have been issued regarding the use of the refunds? What percentage is to be used to cover the federal government's costs of administering the agreement? That's the key question.