Table of Contents

1.1 The purpose of this Notice is to provide information to exporters on the new transfer system for softwood lumber that comes into effect April 1, 1997.

1.2 This Notice cancels and replaces the Notice to Industry of October 18, 1996, paragraphs 19.0 to 19.9 in the Notice to Exporters no. 94 of October 31, 1996, and the Notice to Industry of November 12, 1996, regarding transfers.

2.1 Definitions: The export levels assigned to companies under the Canada-U.S. Softwood Lumber Agreement (henceforth "Agreement") are called "allocations" in this Notice to conform with common usage. The term "allocation holder" refers to a company that has been assigned an export level (i.e. allocation) by the Minister. The term "Bonus allocation" means a fee free allocation assigned to a company from a trigger-price bonus earned by Canada under the Agreement. The term "EB allocation" refers to a fee free allocation assigned to a company from the Established Base of 14.7 billion board feet established under the Agreement. The term "LFB allocation" means a $50 U.S. fee allocation assigned from the Lower Fee Base of 650 million board feet established under the Agreement. The acronym "EICB" refers to the Export and Import Controls Bureau of the Department of Foreign Affairs and International Trade which is responsible for administering the Agreement. The term "year" means a period from April 1 of one calendar year to March 31 of the following year (the period of validity of an assigned export level). The term "quarter" refers to a sequential quarter of such a year, so that the "first quarter" is April 1 to June 30 of a calendar year, and so on. The term "UFB fees" refers to the $100 U.S. Upper Fee Base fee charged under the Agreement on exports not covered by a Bonus, EB or LFB allocation. The term "customs brokers" refers to Canadian customs brokers that have on-line access to the EICB computer. Terms such as "softwood lumber", "province of first manufacture", "primary producer", "remanufacturer" and "wholesaler", among others, are defined in the Preamble to the Questionnaires contained as Annex 1 in the Notice to Exporters no. 92 of June 19, 1996, and in the Notice to Exporters no. 94 of October 31, 1996.

3.1 This Notice shall remain valid until further notice.

4.1 Based on the advice of industry, the dual transfer system of drawdowns and quarterly transfers will be replaced by a single transfer system, effective April 1, 1997. The purpose of the new transfer system is to further facilitate "business as usual" for wholesalers and remanufacturers.

4.2 The main features of the new transfer system are:

4.3 Who can make transfers: The new transfer system can be used by primary producers and remanufacturers to transfer allocations (with lumber) to wholesalers, and by primary producers to transfer allocations (with lumber) to remanufacturers for lumber to be further remanufactured prior to exportation to the United States. However, commercial arrangements that may underlie any transfer are a private matter between the companies involved, and the Government will not enforce the provisions of these private arrangements. (The Government will, however, conduct verifications and enforce the conditions set out below for making transfers.)

4.4 Further transfers: Under the new transfer system, the transferee becomes a temporary allocation holder and can further transfer his or her Bonus, EB or LFB levels to another company without the permission of the original allocation holder. As in the case of the original transfer, any further transfer must comply with all notification requirements and other conditions relating to transfers described in this Notice.

5.1 Quarterly carry-forward of transfers: Since there are usually delays between the shipment from the primary mill or remanufacturer, and the subsequent export shipment from the wholesaler's yard or remanufacturer's facility, transfers will automatically carry forward during the first three quarters of a year. Any amounts remaining at the end of the fourth quarter of that year will be lost by the transferee as there is no carry-forward to the next year.

5.2 Transfers and export utilization of original allocation holder: As indicated in paragraph 11.6 of the Notice to Exporters no. 94 of October 31, 1996, each allocation holder's fee free (i.e., Bonus and EB) and LFB export utilization in one year will be taken into account in calculating its EB and LFB allocation for the next year. Except in the case of transfers between related companies (see paragraph 5.4 below), the entire amount of a Bonus or EB transfer will not only be deducted from the original allocation holder's remaining Bonus or EB balance for the currentyear, but this transferred amount will also be "deemed", at the time the transfer is made, as having been exported for purposes of calculating that company's export utilization when determining its allocation for the next year. Likewise, the full amount of a LFB transfer will also be treated as if this amount has been exported by the allocation holder for purposes of this calculation, whether or not the full amount is actually exported by the transferee during the year.

5.3 Transfers and Allocation Holder's Speed Bump and Fees: For those allocation holders subject to the quarterly speed bump provision under Article II(9) of the Agreement, each EB transfer during a quarter will be included in calculating whether that allocation holder has hit its "28.75 per cent speed bump" for that quarter, regardless of whether or not the transferee exports that lumber during that quarter or a later quarter during the year (or if at all). Likewise, the entire amount of a LFB transfer will count as utilized for the purpose of whether LFB or UFB fees should apply to that allocation holder.

5.4 "Transfers" to related wholesalers or remanufacturers: The conditions set out in paragraphs 5.2 and 5.3 above apply only if the transfer is to an unrelated wholesaler or remanufacturer. A "transfer" from an allocation holder to a related wholesaler will not be considered as having been "exported" for purposes of the original allocation holder's export utilization or speed bump until (and only if) the associated lumber has been physically exported to the USA and a permit has been issued. This condition is designed to facilitate the operation of the growth mechanism as set out in paragraph 11.6 of Notice to Exporters no. 94 of October 31, 1996.

5.5 "Transfers" and Consolidation of allocations within a corporate group within the same province: While paragraphs 5.2 and 5.3 do not apply with respect to "transfers" between related parties, a corporate group with separate allocations for its primary producers in the same province may shift its allocations between these primary producers or may consolidate these allocations for its primary producers into one overall allocation. Likewise, a remanufacturer with separate allocations for its remanufacturing operations within a province may also consolidate or shift its allocations between these remanufacturing operations, provided that the allocations are for the same province of origin as the province within which the facilities are located. An allocation holder wishing to shift its allocation from one of its primary producers to another or from a remanufacturer operation to another, or to consolidate either its primary mill allocations or its remanufacturers allocations, within a province, must provide the request in writing to the EICB; such requests will normally be accepted automatically. However, as indicated in paragraph 11.10 of the Notice to Exporters no. 94 of October 31, 1996, beginning on April 1, 1997, companies that received separate allocations as primary producers and as remanufacturers will not be allowed to consolidate or amalgamate their primary mill allocations with their remanufacturer allocations. This restriction is required in order to allow the EICB to verify compliance with the conditions for remanufacturers set out below in section 6 and in the Notice to Exporters no. 94 of October 31, 1996.

6.1 Transfers of allocations allowed only with lumber: Transfers of an allocation level mustbe accompanied by a corresponding sale of lumber from the allocation holder to the transferee. A wholesaler or remanufacturer may receive transfers from a number of different allocation holders; however, at the end of the year, that transferee will be required to reconcile the total quantity of transfers received from each allocation holder with the total quantity of lumber purchased from that allocation holder. Should audits reveal that an allocation holder has been selling or "transferring" export levels without lumber, the Minister may be expected to take this into account when deciding on that company's allocation for the next year.

6.2 Limits on transferrers: Allocation holders may only transfer lumber from their own facility against their allocation, except where they have shifted their allocation to another member of the same corporate group in the same province or have consolidated their allocation within a province (see paragraph 5.5 above).

6.3 Restrictions on amounts that can be transferred: Allocation holders will not be able to transfer more than their EB maximum for a quarter (i.e. 28.75% of their EB allocation), unless they are a small exporter exempt from the speed bump provision (see paragraph 11.3 of Notice to Exporters no. 94 of October 31, 1996). Allocation holders will also not be allowed to transfer more EB than they have remaining in their EB balance; similarly, they will not be able to transfer more Bonus allocation or LFB allocation than they have. Transferrers are required to specify the province of origin (i.e. province of first manufacture) of the lumber they are transferring. For example, a remanufacturer who received allocations for lumber originating in more than one province must specify the provincial allocation from which they are transferring.

6.4 Restrictions on wholesalers and remanufacturers receiving transfers: A wholesaler or remanufacturer must respect the provincial origin of the allocation transferred to him or her (e.g. a transfer from a B.C. primary means that B.C. lumber must be bought from that primary; a transfer from a Quebec remanufacturer's 'Ontario portion' means that Ontario lumber must be bought from that remanufacturer). Remanufacturers face an additional condition: they are also required to remanufacture the lumber they receive under transfers prior to exporting it to the United States.

6.5 Verifications: The EICB intends to conduct periodic audits to ensure that the conditions and requirements for making and receiving transfers set out in this Notice are respected.

7.1 Transfer services: Companies wishing to make or receive transfers should make appropriate arrangements with Canadian customs brokers because, beginning on April 18, 1997, the EICB will not process transfer requests or query transfer accounts, except for a few small companies which, because of their particular circumstances and location, do not have ready access to customs brokers.

7.2 Role of brokers: Several Canadian customs brokers have on-line access to the EICB computer. Starting on April 1, 1997, these brokers will be able to make transfers on behalf of allocation holders and will be able to query transfer accounts for wholesalers andremanufacturers receiving transfers (as well as conducting the services they are already providing such as applying for export permits and querying balances). The fees or charges by customs brokers for these transfer services are private matters between transferrers, transferees and brokers; the EICB takes no responsibility for these private payment arrangements. However, as indicated below, transferrers and transferees must send the EICB written notices of authorization before on-line brokers can either conduct transfers or query transfer accounts on their behalf. Notices of any changes or cancellations of authorizations for brokers must also be provided to the EICB in writing, and these do not come into effect until the change or cancellation is confirmed by the EICB. A list of customs brokers having access to the on-line computer system may be obtained from the EICB on request.

7.3 Customs Brokers will be able to make transfers: An allocation holder (i.e. a transferrer) can make transfers through any Canadian customs broker for which it has provided a notice of authorization to the EICB. Written notice of authorization is required only to notify the EICB that a particular customs broker is authorized to make transfers on behalf of an allocation holder (or a wholesaler which wishes to make further transfers); written notice is not required afterwards for each individual transfer made by that broker for the allocation holder. Attached under Annex I of this Notice is a copy of the form which may be used by an allocation holder to notify the EICB that the allocation holder has authorized one or more brokers to make transfers on its behalf.

7.4 Customs Brokers will be able to query transfer accounts: A transferee (i.e., wholesaler or remanufacturer receiving a transfer) will be able to query its transfer account through any customs broker for which it has provided, in writing to the EICB, a notice of authorization to have access to its file to the EICB. The on-line information will include a reference or tracking number for each transaction, the amount transferred into the account and the date, amounts debited from the account (i.e., amounts exported or transferred to other companies) and the date, and the remaining balance in the transferee's account. Since transfers can involve Bonus allocations, EB allocations and LFB allocations, the on-line information will be provided separately for each type of allocation. Attached under Annex 2 of this Notice is a form that may be used by transferees to authorize one or more brokers to query and obtain this information on its behalf. This on-line access will not be available for companies that do not use customs brokers.

7.5 Designating Type of Allocation to be transferred: Allocation holders will be required to designate whether the transferred amount is to be taken from its Bonus allocation, EB allocation or LFB allocation. Where Bonus allocations are being transferred, the parties involved in the transfer should take care to ensure that the Bonus allocation level can be utilized by the transferee before that Bonus allocation expires. The Government takes no responsibility for transfers of Bonus allocations that expire before the wholesaler or remanufacturer is able to export the transferred lumber.

7.6 EICB numbers for transfer accounts (i.e., 448xxx series): Transfers will be made to EICB numbers starting with the first three digits "448" (i.e., 448xxx series). Transferees will be able to apply for export permits to export lumber to the United States or to transfer lumber toother companies by using their 448xxx series EICB number. Any company wishing to receive transfers (and hence export to the United States or make further transfers) should contact the EICB to obtain a 448xxx series number. When applying for a permit or making a further transfer, the holder of a 448xxx EICB number account will be able to designate the type of allocation to be debited from its account (e.g., Bonus allocation, EB allocation or LFB allocation).

7.7 Exports and export fees for Transferees: The transferee's 448xxx EICB number becomes, in effect, its temporary allocation account. As such, any exports of softwood lumber to the United States or further transfers by the transferee will be counted against the balance in that account in the same manner as if it was an original allocation holder. Should a transferee apply for an export permit in excess of its fee free balance (i.e., Bonus or EB allocation levels), then the transferee, as the exporter, would be liable for any export fees owing under the Agreement. If that transferee has no LFB allocation levels in its transfer account, then any overage would attract the UFB fee on the excess amount. The exporter is always responsible for any fees owing on exports of softwood lumber to the United States.

7.8 Transferee's Balance: Transfers will be automatically entered into a transferee's 448xxx EICB number account once the transfer request has been processed and accepted by the EICB computer. The EICB has no means of knowing what shipments have been made until a permit is requested. Therefore, the balance in any transfer account may be higher than the actual allocation level remaining within that transferee's Bonus, EB or LFB accounts. In other words, querying the EICB system is not a substitute for exporters maintaining accurate shipping records. The EICB will provide detailed reports to transferees once a month, and (subject to resource availability) may be ordered at other times for $60 or more per request, depending on the costs incurred to produce them.

7.9 Changes, Amendments or Cancellations of Transfers: Customs brokers will not be able to make corrections, amendments, reversals or cancellations of transfers, except where a change involves increasing the amount of the transfer (which in effect would be treated as a separate transfer by the EICB computer). Once a transfer has been entered and accepted by the EICB computer, any reversal, correction, cancellation or change in the transfer (e.g., a reduction in the amount transferred, a change in the company receiving the transfer) must be requested in writing to the EICB and does not come into effect until the EICB has verified the error with the involved parties and has provided written confirmation. This restriction on changes to transfers (and not allowing such changes to be made through the on-line facilities of the brokers) is required in order to protect the interests of the involved companies.

7.10 Timely notice: Notification of authorization for a Canadian customs broker to make transfers on behalf of an allocation holder must be made to the EICB sufficiently in advance of the first intended transfer (and hence exportation) so that the transfer account for the transferee can be established; if that account has not been established (or does not have enough to cover the amount exported), then UFB fees will be applied, and cannot be corrected by a retroactive authorization. If the account balance is queried before the shipment is released into the United States, of course, the likelihood of goods being shipped too early and fees being incurred will be reduced. (See paragraph 20.3 of Notice to Exporters no. 94 of October 31, 1996)

7.11 Minister's policy on transfers: It is the Minister's policy that transfers to wholesalers or remanufacturers that meet the above requirements will normally be automatic upon application for a transfer. Other transfers may take place with the Minister's prior permission, but these first must be requested in writing to the EICB (and if the request is accepted, the transfer will be made directly by the EICB). Nevertheless, the Minister reserves the right to approve or reject all transfers. The Minister's decisions will be based on the above-mentioned policy considerations, which are intended as a common-sense reflection of how the trade and the export controls system can best work together.

8.1 Who to ask: Inquiries about Canadian procedures described in this Notice or the earlier Notices, or about the Canada-United States Softwood Lumber Agreement, as well as authorizations for brokers to conduct services related to transfers, may be addressed to:

The Softwood Lumber Unit,
Trade Controls Policy Division (EPM)
Export and Import Controls Bureau,
Department of Foreign Affairs and International Trade

Courier address: Tower C, 4th Floor Lester B. Pearson Building, 125 Sussex Drive, Ottawa, Ontario, K1A 0G2	Mailing address: P.O. Box 481 Station A, Ottawa, Ontario, K1N 9K6
E-mail address: eps@dfait-maeci.gc.ca	Telephone: (613) 944-2167 Facsimile: (613) 944-2170

1. I, the undersigned, am authorized by the Minister of Foreign Affairs (the Minister) to hold softwood lumber export level, or I am the duly authorized signing officer for a party so authorized, for obtaining softwood lumber export permits, issued pursuant to the Export and Import Permits Act;

2. I acknowledge that an export level is an administrative means by which the Minister indicates in advance how he may exercise discretion under section 7(1) of the Export and Import Permits Act, and that there is no right to obtain an export permit;

3. Take Notice that the Canadian Customs Brokers listed below are authorized to transfer export level out of my softwood lumber export level account, to the credit of exporters who have softwood lumber export file numbers issued by the Export and Import Controls Bureau (EICB) in the Department of Foreign Affairs and International Trade; I understand that any amendment to this list must be made in writing:

The Softwood Lumber Unit,
Trade Controls Policy Division (EPM),
Export and Import Controls Bureau,
Department of Foreign Affairs and International Trade
P. O. Box 481, Station A,
Ottawa, Ontario K1N 9K6
Facsimile: (613) 944-2170

1. I, the undersigned, am authorized by the Minister of Foreign Affairs (the Minister) to hold softwood lumber export level, or I am the duly authorized signing officer for a party so authorized, for obtaining softwood lumber export permits, issued pursuant to the Export and Import Permits Act;

2. I acknowledge that an export level is an administrative means by which the Minister indicates in advance how he may exercise discretion under section 7(1) of the Export and Import Permits Act, and that there is no right to obtain an export permit;

3. I Authorize the Minister and officials in the Export and Import Controls Bureau (EICB) in the Department of Foreign Affairs and International Trade to release, to Customs Brokers listed below, all information respecting my softwood lumber export level account, including all elements of line-by-line transactions and balances relating to permit applications, transfers and export level transactions; I understand that any amendment to this list must be made in writing:

The Softwood Lumber Unit,
Trade Controls Policy Division (EPM),
Export and Import Controls Bureau,
Department of Foreign Affairs and International Trade
P. O. Box 481, Station A,
Ottawa, Ontario K1N 9K6
Facsimile: (613) 944-2170