Okay.
The fee-in-lieu aspect is another challenge for many first nation companies here that are impacted by the variable rate for lower-valued whitewood—hemlock, balsam and spruce—which is taxed typically at 10% to 35% of their domestic value. The higher the value surrounding the whitewood, the higher the whitewood is taxed. Plus, the fee-in-lieu was set at 10% prior. There are only two mills on the coast cutting hemlock. The new tax structure removes the ability for the tenure holders to increase net revenue by moving whitewood deemed surplus to domestic needs, as per the surplus test, and other markets, such as the U.S. and Asia, that often pay much higher prices.
With the incentive to move surplus volume to other markets, tenure holders are concerned that the domestic market will become flooded, which will quickly drive down pricing and result in tenure holders, first nations included, to either not bring any volume to market or to focus on Douglas fir and cedar stands, which is high-grading the timber profile. Forestry tenure holders are already seeing a negative harvest response from this implementation of the policy. Some coastal logging contractors are beginning to find themselves short of work.
This trend will continue in areas where log exports and domestic sales were balanced prior to the new policies. Currently, first nation—